COULD US STABLECOINS REDUCE INTEREST RATES?

It sounds like science fiction. It is not. The GENIUS Act, signed in July 2025, requires every dollar stablecoin to be backed one-to-one with cash and short-term US Treasuries. Read that sentence again: every single dollar converted into a stablecoin becomes, by law, a forced buyer of US government debt.

Look at the numbers. There are around 2,400 billion dollars in physical notes in circulation, roughly half of them outside the US. They finance nothing today. American bank deposits amount to 19,600 billion, of which around 7,700 billion already sit in Treasuries, agency paper and reserves at the FED. The rest, about 12,000 billion, finances private credit: mortgages, corporate loans, consumer loans. In total, around 14,000 billion dollars sit outside government financing today.

Convert that pool into stablecoins, and all of it is placed in government paper by force of law. That covers a third of the national debt of over 40,000 billion, and four to five years of deficits running at 3,000 billion a year. More forced demand for Treasuries means higher prices and lower yields at the short end. That is the mechanism behind the headline.

What if the US introduced a government stablecoin to replace cash? It has many benefits: instant or near-instant payments, full traceability, no more black market for USD dollar bills, and the cherry on the cake, the US government gets a forever buyer of its debt, and most likely the interest on that debt will end up at the Treasury.To be clear: the US has not said it will switch from the dollar to a government stablecoin. Officially, the policy is the opposite, Trump has even signed an executive order against a central bank digital currency. What is on the table is private, dollar-backed stablecoins as an extension of the dollar.

What we are describing is the mechanism, taken to its logical endpoint. And here is the elegant part, seen from Washington: the user notices nothing. You hand in fiat, you get stablecoins back, one to one. The dollar does not disappear. But behind the scenes your money has changed jobs, from financing mortgages and businesses to financing the government. The issuer keeps the interest income from the Treasuries, the GENIUS Act actually forbids passing that yield on to you.

Treasury Secretary Bessent wrote that this new demand "could lower government borrowing costs", and that a thriving stablecoin ecosystem will drive private sector demand for US Treasuries. He called it a win-win-win. In November he raised his forecast to 3,000 billion dollars by 2030, and said stablecoin issuers are now factored into the government's long-term debt management strategy.

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