If the U.S. enacts a regulatory framework for stablecoins, it could unlock over $1 trillion in new demand for U.S. Treasuries and make stablecoin issuers some of the largest holders of government debt by the end of the decade, according to a new Citigroup report.
The Wall Street Bank said a well-defined regulatory structure could position stablecoins as major drivers of global demand for dollar-denominated, risk-free assets. Under such a framework, issuers would be required to back their digital tokens with low-risk collateral such as U.S. Treasuries, dramatically boosting Treasury holdings within the sector.
“Creating a U.S. regulatory framework for stablecoin would support demand for dollar risk-free assets inside and outside the U.S,”
the report stated. Citigroup’s base-case scenario projects that by 2030, stablecoin issuers could collectively hold more U.S. government debt than any foreign nation.
However, the report also flagged significant risks, particularly the threat of a “run” on stablecoins in times of crisis. In 2023 alone, stablecoins de-pegged roughly 1,900 times—600 of those involving large-cap tokens—highlighting the sector’s fragility.
The bank further noted geopolitical hurdles to global adoption. Policymakers in regions like China and the EU may resist the widespread use of U.S.-linked stablecoins, viewing them as tools for expanding American financial influence. Instead, these regions may accelerate the development of central bank digital currencies (CBDCs) or national-currency-backed stablecoins as alternatives.
Despite the challenges, Citigroup believes that regulatory clarity in the U.S. could fundamentally reshape the stablecoin and government debt landscape over the next five years.
Meanwhile, Denis Beau, the first deputy governor of the Banque de France, has warned that the recent executive order from the Trump administration promoting dollar-backed stablecoins could significantly adversely affect Europe’s financial independence. He stressed the urgent need for Europe to accelerate the development of a digital euro to protect its monetary sovereignty.
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