Stablecoin issuers have absorbed more than 40 percent of China's decline in U.S. Treasury holdings since 2021, according to new research from the San Francisco Federal Reserve.
The San Francisco Fed's Economic Letter, dated Sept. 28, 2026, identifies stablecoin issuers as a substantial new buyer of U.S. government debt. Issuers collectively added approximately $200 billion in Treasury holdings between 2021 and mid-2026, a period that directly overlaps with China's reduction in its position.
The Fed's research shows stablecoin issuer holdings have expanded more than tenfold in five years. Since 2023, purchases of short-term Treasury bills by stablecoin issuers have surpassed those made by Japan.
This buying activity concentrates heavily among the two largest stablecoins, which favor short-term Treasury instruments. Stablecoins promise redeemability at a fixed value, typically one dollar, making short-dated government debt a natural backing asset.
The San Francisco Fed projected stablecoin issuer demand for short-term Treasuries could reach approximately $400 billion by the end of 2030, assuming current trends persist.
Bitwise CIO Matt Hougan expects significant growth ahead. "They're going much, much higher," Hougan said. He reported speaking with over 40 financial advisors managing assets exceeding $175 trillion, noting their interest in stablecoins and tokenization surpassed their appetite for Bitcoin as a speculative investment.
Tokenization—the representation of traditional assets on a blockchain—often accompanies stablecoin growth, as tokenized assets require dollar-like tokens for trading and settlement.
The concentration of Treasury holdings in just two issuers presents a structural risk. A large share of this Treasury demand rests on the operational stability and regulatory standing of these few entities.
