Stablecoins Hold About as Much U.S. Debt as India, and the Treasury Is Counting on More
Treasury's deputy secretary told the bond market on September 22 that stablecoin issuers hold nearly $200 billion of Treasury bills and called it a growth opportunity.
Summary: On Tuesday, September 22, Deputy Treasury Secretary Francis Brooke told the Treasury Market Conference at the New York Fed that stablecoin issuers "already own nearly $200 billion of Treasury bills and other close-to-maturity Treasury securities," and that "as the rules implementing the GENIUS Act are finalized, we may see stablecoin providers continue to grow and add to their holdings of Treasury securities."
On Thursday the Federal Reserve proposed rules for the banks it supervises: a dollar token backed one for one by cash, Fed balances, insured deposits, Treasuries maturing within 93 days or overnight loans against them, with no interest paid to the holder.
Also last week, Binance put $100 million into Circle, the company behind USDC, and signed a five-year deal to push the token "across emerging markets."
And in Frankfurt, the European System of Central Banks told the European Commission that "the payment of stablecoin remuneration should continue to be prohibited," because electronic money "is intended to be used for making payments and not as a means of saving."
Thesis: When you buy a dollar token, the issuer takes your dollar and lends it to the U.S. government by buying Treasury bills. The government gets the money while the issuer gets the interest, and shares it with whoever put the token in front of you. You get a receipt that's worth a dollar and moves at any hour.
For a year the argument in Washington has been about that last part, whether anyone may pay you for holding the receipt, which is what makes the events of this week so interesting.
The Treasury put a number on what stablecoins already do for the government's borrowing and called it a growth opportunity. The Fed wrote the rules that keep the reserve parked in short government paper. The largest crypto exchange paid $100 million to sit closer to the interest.
And Europe's central banks said the holder should keep earning nothing on the euro version, and that the cap on the dollar version needs to be made enforceable.
A dollar token is a Treasury bill with a phone app
A stablecoin is a company's promise to hand you a dollar for a token, and the law now says what the company has to keep on hand to make good on it.
The GENIUS Act, signed last July, lists the permitted reserves: U.S. currency, demand deposits at insured banks, "Treasury bills, notes, or bonds" with "a remaining maturity of 93 days or less," overnight repurchase agreements backed by Treasuries, and funds that invest only in those things. A dollar of reserves for every dollar of tokens, at all times.
Thursday's Fed proposal turns that list into an examination manual for the banks it supervises. One notice sets out how a state member bank gets approval for a subsidiary to issue a token, with a decision due within 120 days.
The other says what the subsidiary must do once it has permission. The staff memo to the Board spells out the reserve list, adds a capital charge of 2 percent on the first $20 billion of tokens outstanding, 1.5 percent on the next $30 billion and 1 percent above that, and repeats the statute's line that an issuer "must not pay the holder of any payment stablecoin any form of interest or yield."
Comments are due 60 days after the notices reach the Federal Register, which they haven't yet; the deadline in both is still a bracketed instruction to insert a date.
Governor Michael Barr signed on with a worry. He wants the final rule to guarantee that a token can be "reliably and promptly redeemed at par in a range of conditions," including stress in the market for government debt. That sentence does more work than it looks like, and I'll come back to it.
Treasury bills are the government's IOUs that come due within a year, and the 93-day cap keeps stablecoin reserves at the very short end of that. So a regulated dollar token is a wrapper around the shortest-dated debt the U.S. government sells, and every dollar of tokens issued becomes, within days, a dollar lent to the Treasury.
Treasury put a number on it
The Treasury Market Conference is where the government talks to the people who buy its debt. Brooke's speech had a section headed "Growing Demand," and it reads like a roll call of customers.
Banks have added "more than $300 billion" of Treasuries since the end of 2024. Money market funds, with "around $8 trillion" in assets, are "some of the largest owners of Treasury bills."
Then, in one sentence, a customer that didn't exist as a category five years ago: "Stablecoin providers represent another important source of demand and already own nearly $200 billion of Treasury bills and other close-to-maturity Treasury securities." Then the Fed, which has bought "more than $300 billion of Treasury bills this year alone." He closed by saying Treasury "continues to monitor all sources of structural demand," naming banks, money market funds "and stablecoin providers."
Two hundred billion is a number most people can't place, so here's where it sits. Treasury's own table of foreign holders for July has India at $202.6 billion and Norway at $206.9 billion. Brazil holds $168 billion, Saudi Arabia $142 billion. If the stablecoin issuers were a country, they'd sit around fifteenth on the list.
Against the whole bill market it's smaller. Treasury had $7.25 trillion of bills outstanding at the end of August, up $260 billion in a single month, so stablecoins hold under three cents of every bill dollar. What they throw off is easier to feel. The three-month bill yielded 4.24 percent on Thursday. On $200 billion that's roughly $8.5 billion a year of interest, paid by the government to the issuers, on money the holders supplied.
The timing gave the speech an edge. The ten-year Treasury went from 4.96 percent on Monday to 5.18 on Thursday. A government paying more to borrow wants every buyer it can find, and on Tuesday it named one that's required by law to buy the shortest paper it sells.
Tether, which calls itself "one of the world's largest buyers and holders of U.S. Treasuries" in its second-quarter attestation, put its Treasury bill exposure at "approximately $141 billion" in its first-quarter release. Circle had $73.3 billion of USDC out in June. Together that lands near Brooke's figure.
The Fed's vice chair and an SEC commissioner spoke at the same conference the same day, and neither mentioned stablecoins. The part of the government that sells the debt brought it up. The parts that supervise the buyers didn't.
The honest case against this read
Money market funds are forty times the size of stablecoin holdings. The Fed bought more bills this year on its own than every stablecoin issuer holds. Brooke gave stablecoins one sentence in a list of four, and I'm building a fiscal thesis on it.
What keeps me on this side is where the sentence sits: in a section titled "Growing Demand," with growth made conditional on rules Treasury itself is finalizing, and a closing line that names stablecoin providers among the "sources of structural demand" the quarterly refunding process tracks.
The second is that a buyer is also a seller. A pool of tokens redeemable at par on demand, backed by bills, is a pool that has to sell bills in a panic.
Barr's "range of conditions, including periods of stress in the market for government debt" is the Fed saying the same thing in advance. Treasury has found a new buyer whose exit door opens straight onto the bill market, and it said so the same week its ten-year yield crossed 5 percent.
The third is that "the holder earns nothing" is true of the issuer and false of the system. Circle's $410 million of distribution payments partly reaches customers as rewards on the platforms, which is the gap last week's issue was about, and in the U.S. that route stayed open when the Clarity Act fell. The honest sentence is that the law forbids the issuer to pay you, and the exchange may, out of its share.
What to watch
The Federal Register. The Fed's two notices start a 60-day comment clock the day they're printed, and the deadline doesn't exist until then. The OCC's final GENIUS rule, promised by November, lands in the same window, and it decides how far the yield ban reaches into issuers' distribution deals.
Treasury's next quarterly refunding, in early November. Brooke pointed at the last one as the place stablecoin demand was already being monitored. If the borrowing estimates or the advisory committee's materials carry a stablecoin line, the fiscal interest has a document.
Circle's third-quarter report, for whether distribution payments jump once Binance is inside the deal.
The Commission's MiCA review. Whether the yield ban survives and the 200 million euro cap gets the reporting it needs is the euro area deciding whether to keep the dollar token small on purpose.
Strategic implications
If you're building. Your product is a share of a Treasury bill coupon, split by contract. The Fed sets the coupon, the issuer sets your cut, and this week's documents say the customer at the growth end wants a bank's name on the wrapper.
If you're allocating capital. Circle's economics are public and Binance just bought them at a 5 percent discount. Sixty-one cents of every interest dollar leaves for the distributors, so the distributor owns the customer and the issuer owns the license.
If you write policy. The stablecoin question has moved from the banking committee to the debt desk. Once Treasury counts these issuers as structural demand, any restriction on them has a borrowing cost attached, and that argument will get made.
Daniel McGlynn
Last week's issue...
Sources
[1] U.S. Department of the Treasury. "Remarks by Deputy Secretary of the Treasury Francis Brooke before the Treasury Market Conference," September 22, 2026, Federal Reserve Bank of New York. Press release sb0633. https://home.treasury.gov/news/press-releases/sb0633
[2] Board of Governors of the Federal Reserve System. "Federal Reserve Board requests public comment on two proposals related to establishing a regulatory framework for Board-supervised payment stablecoin issuers under the GENIUS Act," September 24, 2026. https://www.federalreserve.gov/newsevents/pressreleases/bcreg20260924a.htm
[3] Federal Reserve Board staff memo to the Board of Governors, "Notice of proposed rulemaking to implement the GENIUS Act with respect to permitted payment stablecoin issuers and certain other entities that are subject to the Board's jurisdiction," September 3, 2026. Reserve asset list and capital percentages. https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20260924a1.pdf
[4] Federal Reserve Board. Notice of proposed rulemaking, "Implementing the Federal Reserve Board's Responsibilities under the GENIUS Act," RIN 7100-AH29, Docket No. R-1899. Interest prohibition and bracketed comment deadline. https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20260924a4.pdf
[5] Federal Reserve Board. "Statement on Proposed Regulatory Framework for Stablecoins by Governor Michael S. Barr," September 24, 2026. https://www.federalreserve.gov/newsevents/pressreleases/barr-statement-20260924.htm
[6] Public Law 119-27, the GENIUS Act, approved July 18, 2025. Sections 4(a)(1) and 4(a)(11). https://www.govinfo.gov/content/pkg/PLAW-119publ27/html/PLAW-119publ27.htm
[7] U.S. Department of the Treasury, Treasury International Capital System. "Major Foreign Holders of Treasury Securities," Table 5, July 2026 column. https://ticdata.treasury.gov/resource-center/data-chart-center/tic/Documents/slt_table5.html
[8] U.S. Department of the Treasury, Fiscal Data. Monthly Statement of the Public Debt, Table 1, record date August 31, 2026. Marketable bills held by the public: $7,247,855.59 million. https://api.fiscaldata.treasury.gov/services/api/fiscal_service/v1/debt/mspd/mspd_table_1?filter=security_class_desc:eq:Bills&sort=-record_date&page[size]=2
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[10] Circle Internet Group, Inc. "Circle Reports Second Quarter 2026 Results," August 5, 2026, as furnished to the SEC. Reserve income $667.7 million; distribution, transaction and other costs $412.5 million; USDC in circulation $73.3 billion; reserve return rate 3.5 percent. https://www.sec.gov/Archives/edgar/data/1876042/000187604226000246/augustepr-circle_q22026f.htm
[11] Circle Internet Group, Inc. "Binance Invests $100 Million in Circle, Expands Strategic Partnership and Renews Commercial Agreement for Five Years," September 22, 2026. https://www.circle.com/pressroom/binance-invests-100-million-in-circle-expands-strategic-partnership-and-renews-commercial-agreement-for-five-years
[12] Tether. "Tether Posts Strong Q2 Performance, Generates $1.5B Net Operating Profit, Maintains $4.11B Reserve Buffer, and Expands Gold Holdings to More Than 146 Tons," July 31, 2026. https://tether.io/news/tether-posts-strong-q2-performance-generates-1-5b-net-operating-profit-maintains-4-11b-reserve-buffer-and-expands-gold-holdings-to-more-than-146-tons/
[13] Tether. "Tether Posts $1.04B Q1 2026 Profit Despite Highly Volatile Global Markets, Reaches All-Time-Highs $8.23B Reserve Buffer, and Maintains U.S. Treasury-Heavy Backing," May 1, 2026. Direct and indirect Treasury bill exposure of approximately $141 billion at March 31, 2026. https://tether.io/news/tether-posts-1-04b-q1-2026-profit-despite-highly-volatile-global-markets-reaches-all-time-highs-8-23b-reserve-buffer-and-maintains-u-s-treasury-heavy-backing/
[14] Visa Inc. "Safeguards Could Boost Stablecoin Use Among Americans, Finds Visa Study," September 23, 2026. Money Travels 2026, Morning Consult, 2,192 U.S. adults, fielded February 24 to March 2, 2026. https://usa.visa.com/about-visa/newsroom/press-releases.releaseId.22771.html
[15] European System of Central Banks. "ESCB response to the European Commission's targeted consultation on the Markets in CryptoAssets Regulation (MiCAR)," September 2026. Section 3.2.3. https://www.ecb.europa.eu/press/consultationresponse/pdf/ecb.conresp202609_micarreview.de.pdf
[16] Joint Committee of the European Supervisory Authorities. "Joint Committee Update on Risks and Vulnerabilities in the EU Financial System, Autumn 2026," JC 2026 29, September 23, 2026. https://www.esma.europa.eu/sites/default/files/2026-09/JC_2026_29_JC_update_on_risks_and_vulnerabilities_autumn_2026.pdf
[17] European Central Bank. Piero Cipollone, "The digitalisation of money, payments and finance," Fondazione ResPublica, September 23, 2026. https://www.ecb.europa.eu/press/key/date/2026/html/ecb.sp260923~87850778f5.en.pdf
[18] European Central Bank. "Eurosystem brings central bank money to tokenised finance," September 21, 2026. https://www.ecb.europa.eu/press/pr/date/2026/html/ecb.pr260921~e754847a7b.en.html
[19] Federal Reserve Board. "Money Market Mutual Fund Liquidity Facility," established March 18, 2020. https://www.federalreserve.gov/monetarypolicy/mmlf.htm
[20] Bank of England. "Sterling-denominated systemic stablecoins," policy statement and consultation on a draft Code of Practice, published June 22, 2026. Backing mix, unremunerated Bank deposits, interest prohibition, activity-based rewards, £40 billion initial issuance cap. https://www.bankofengland.co.uk/paper/2026/ps/sterling-denominated-systemic-stablecoin