The Emerging Demand for US Treasuries: Stablecoins and Tokenization

The U.S. debt market is facing unprecedented challenges. In 2025, nearly $3 trillion in government bonds will mature, most of which are short-term bonds. The net issuance by the U.S. Treasury in 2024 has reached $26.7 trillion, a year-on-year surge of 28.5%. This rapid growth has brought immense pressure.

However, the traditional demand for U.S. Treasuries is weakening. The pace at which foreign central banks are increasing their holdings of U.S. Treasuries is only 11%, far lower than the growth rate of U.S. Treasury issuance. Some countries have even begun to actively reduce their holdings of U.S. Treasuries, such as China and Japan. This weakness on the demand side stands in stark contrast to the rapid expansion on the supply side, presenting a dual challenge for the U.S. Treasury market.

In this context, the crypto market is opening up new sources of demand for U.S. Treasury bonds. Stablecoins, as the main vehicles, are absorbing a large amount of U.S. Treasury bonds. Currently, the two major stablecoins, USDC and USDT, collectively hold over $140 billion in U.S. Treasury bonds, accounting for about 3% of the short-term U.S. Treasury bonds that are about to mature. This scale has already surpassed the holdings of some national central banks.

With the continuous increase in the global adoption rate of stablecoins, it is expected that the market value of stablecoins could exceed $400 billion by 2025, leading to an additional demand for U.S. Treasury bonds exceeding $100 billion. This means that stablecoins may rank among the top 10 holders of U.S. Treasury bonds globally, becoming an important support force in the U.S. Treasury bond market.

In addition to stablecoins, the tokenization of U.S. Treasury bonds is also becoming an important trend. The tokenized U.S. Treasury bond market has grown from $769 million at the beginning of 2024 to $3.4 billion at the beginning of 2025, achieving approximately a fourfold increase. This not only reflects the market's recognition of the tokenization form of U.S. Treasury bonds but also showcases the enormous potential for on-chain financial innovation.

The tokenization of US Treasuries has brought more reliable underlying assets and robust yields to the DeFi ecosystem. At the same time, it has opened up a new buyer market for US Treasuries, enhancing their global liquidity and attractiveness. This innovation allows US Treasuries to break through geographical limitations, enabling convenient cross-border transactions and cross-chain flow.

Looking ahead, we may see larger-scale U.S. Treasury bonds on-chain, as well as more DeFi projects based on tokenization of U.S. Treasury bonds emerging. This will not only change the way on-chain wealth management and investment are conducted but may also drive U.S. Treasury bonds to become a more core asset in the global financial market.