The issuers of stablecoin: the 18th largest holder of US debt

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The issuers of stablecoin are a significant source of demand for United States (USA) Treasury securities, ranking 18th as the largest holder of US debt.

This phenomenon highlights the growing role of stablecoin in the global economy. Furthermore, it raises new concerns regarding the management of debt by the Washington government. Let’s see all the details below.

The growing concerns about Washington’s (USA) debt management and the growth of stablecoin 

As anticipated, the issuers of stablecoin emerge as a source of demand for United States Treasury securities. Meanwhile, concerns about Washington’s debt management are growing.

According to the data from Tagus Capital, issuers now cumulatively hold more than 120 billion dollars in United States Treasury securities.

This makes them the 18th largest holder of U.S. debt in the world, ahead of nations like Germany and South Korea. 

Tether, the issuer of USDT, the main cryptocurrency in the world pegged to the dollar by market value, holds alone about 91 billion dollars in Treasury.

Circle, the issuer of USDC, holds short-term U.S. debt, including repurchase agreements. This amounts to 29 billion dollars, according to Tagus Capital.

The legislation on stablecoin is among the cryptocurrency bills closest to becoming law in the United States.

Hopes remain alive that Congress will approve a new law on stablecoins before this year’s elections.

Doubts about the law on stablecoin

In April, Patrick McHenry, a key member of Congress, demonstrated optimism regarding the fact that the United States would pass a law on stablecoin by the end of the year.

However, the attempts to include a regulation of stablecoin in an unrelated reauthorization bill have failed. 

McHenry stated that “we are so close on this, we just need a legislative calendar, so we can bring things to the finish line in the Senate.” 

Tom Emmer, Majority Whip in the House of Representatives, suggested that the ‘lame duck session’ could be the opportune moment to attach legislation to a bill that must be passed. 

We remind that the lame duck session occurs in the transition period after the elections, before the elected president takes office in January 2025.

Increasing public debt and concerns

The public debt of the United States has surpassed the threshold of 34 trillion dollars at the beginning of this year and has grown rapidly, increasing by about 1 trillion dollars every 100 days.

It is expected that interest payments on the debt, also known as the cost of servicing the debt, will reach 892 billion dollars in 2024. The growing debt has prompted the Treasury to increase bond supplies from 2023.

On Tuesday, the Congressional Budget Office stated that the national debt could reach 50 trillion dollars by 2034. This would be equivalent to 122% of the annual economic output.

At the beginning of this year, COB warned that the growing concerns about debt could lead to a Liz-Truss style market chaos. Characterized therefore by the sharp drop in the US dollar and political uncertainty.

Cryptocurrency experts have long echoed a similar sentiment. In particular, stating that concerns about debt and the loss of confidence in Treasuries could stimulate the widespread adoption of alternative assets like Bitcoin and gold.

The issuers of stablecoin are therefore in a position of growing relevance in the global financial landscape.

Influencing therefore not only the cryptocurrency market, but also the traditional financial markets and the management of the United States public debt.

In other words, their continuous expansion and the evolution of regulation will be crucial themes to follow in the coming years.