Stablecoins Didn’t Eat the Treasury Bill Market

Is the US government’s cryptocurrency enthusiasm storing up trouble? With stablecoins in the spotlight as regulators flesh out the finer points of last year’s GENIUS Act, which gave these dollar-pegged tokens Uncle Sam’s stamp of approval, headlines are zeroing in on one question: What happens if there is ever a run on these currencies, forcing them to liquidate their collateral to meet redemption requests? And what if that collateral is primarily US Treasury bills? Would that be a surefire way for crypto troubles to go mainstream? This is actually a pretty old fear. We doubt it holds up.

Stablecoins, for those blissfully unaware, are a niche cryptocurrency that, unlike bitcoin, isn’t a speculative tool. People don’t buy stablecoins in hopes of quick riches. Instead, these tokens aim to stay at $1, hence the “stable” in their name. The big ones back their tokens with a basket of reserve assets, which is kind of the wild west right now. So as the US works to implement the GENIUS Act, regulators are deliberating over which assets are allowed as collateral. US Treasury bills are an obvious choice, given their liquidity and low volatility, and headlines hype stablecoins as major sources of Treasury demand. If regulators don’t widen the pool of approved collateral, analysts warn, trouble in stablecoins could force mass Treasury bill selling, spiking yields and upending the financial system.

But is this true? How big is stablecoins’ footprint? A New York Times article discussing this fear over the weekend noted stablecoin issuers “now hold more Treasury debt than major US government creditors like Saudi Arabia and South Korea.”^[i] Eeeeek!

But … hold up. This isn’t actually so big. The US Treasury releases a monthly report of major international Treasury owners. In December 2025, the latest snapshot available, Saudi Arabia and South Korea ranked 17^th and 18^th, respectively, with $149.5 billion and $140.6 billion.^[ii] That is a far cry from leader Japan, with its nearly $1.2 trillion.^[iii] The entire stablecoin market is about $300 billion, per the Times. The entire marketable universe of US Treasury bills is over $6.8 trillion.^[iv] Stablecoins are a drop in the bucket.

The fear stretches beyond the present, though. Some industry observers foresee the final regulations driving stablecoin demand sky-high, boosted by the government’s blessing, potentially driving issuers to hoard massive amounts of Treasury bills, leading to trouble further down the road. This is a very speculative, pessimistic viewpoint, and we think it misses some things.

Like: There are a lot of eyeballs on this. There have been for years, since popular stablecoin Tether broke its peg to the dollar in 2018. And again in 2022, when Tether sank below $1 in the wake of Terra USD’s collapse. And in 2023, when Circle’s USD Coin broke its peg after disclosing it stored a chunk of its collateral uninsured at Silicon Valley Bank. And last year, as the GENIUS Act worked its way through Congress. Analysts tend to watch any buildup in stablecoins’ Treasury holdings like a hawk. Widespread attention defangs surprise power.

The Office of the Comptroller of the Currency (OCC) has also released its draft stablecoin regulations, including approved reserve assets. That happened last month to little fanfare, probably because the draft is 149 pages of tiny font and minimal paragraph breaks.

In addition to Treasury bills, it blesses actual coins and cash, insured deposits, repos, reverse repos, commercial paper issued by investment companies that own solely approved assets, money market funds invested in solely in approved assets, and anything else that is similarly liquid and gets a green light from the OCC and state regulators. This is a fairly wide pool, which would seem to limit the risk of a stablecoin Treasury stampede as the market grows.

Also, this whole fear hinges on stablecoins a) experiencing a run and b) honoring all redemption requests. The OCC’s draft rules give issuers a lot of leeway here. They do require issuers to meet redemption requests within two business days unless requests exceed 10% of outstanding tokens within 24 hours. But beyond that, the rules mainly instruct issuers to draft and publicly disclose clear redemption processes. Tether already has a public redemption policy, and it seems instructive: The minimum redemption amount is $100,000.^[v] Cashing in any amount below that requires selling them on an exchange, just as you are likelier to sell shares in an ETF on the open market rather than try to redeem them. And given Tether has an outstanding market cap of less than $200 billion and an estimated 534.5 million users, it seems safe to say most balances are below the redemption threshold.^[vi]

Look, we guess it is possible the stablecoin realm eventually gets huge and then crashes and has to mass liquidate US Treasury bills. But you know what else is possible? Literally everything under the sun. Markets deal with probabilities, not possibilities, and they deal specifically with probable events over the next 3 – 30 months. Tiny as the stablecoin market is, and nuanced as redemption policies are, it is highly, highly unlikely to mushroom into an actual systemic risk in the time markets care about.