The rise of stablecoins, digital currencies pegged to assets like the U.S. dollar, is significantly increasing demand for U.S. Treasury bills while solidifying the dollar’s position as the world’s leading reserve currency, according to a recent report by Citigroup.
The report highlights how stablecoins, such as Tether (USDT) and USD Coin (USDC), are reshaping financial markets by driving investment in short-term U.S. Treasuries and reinforcing the dollar’s global dominance.
This trend, fueled by the growing adoption of stablecoins in both cryptocurrency and traditional finance, could have far-reaching implications for global monetary systems.
Stablecoins are cryptocurrencies designed to maintain a stable value, typically by being backed by assets like U.S. dollars or Treasury bills.
The Citi report notes that as stablecoin usage surges, issuers are increasingly investing in short-term U.S. Treasuries to maintain their reserves.
For instance, Tether, the largest stablecoin, held approximately $120 billion in Treasury bills as of March 2025, while Circle, the issuer of USDC, reported over $22 billion in T-bill holdings by February 2025.
This growing demand for Treasuries is driven by the need for liquid, low-risk assets to back the stable value of these digital currencies.
The report projects that stablecoin issuers could hold up to $1 trillion in Treasuries by 2030, potentially surpassing major foreign holders like China and Japan.
The report also underscores the dollar’s entrenched role in global finance.
Approximately 93% of stablecoins are pegged to the U.S. dollar, reflecting its status as the global reserve currency rather than driving it.
Dollar-backed stablecoins like USDT dominate crypto trading and blockchain-based payments, making them a critical bridge between traditional finance and the digital asset ecosystem.
Companies like PayPal and Visa are also exploring stablecoin use cases, further integrating these digital currencies into mainstream financial systems.
However, the report cautions that regulatory constraints, such as restrictions on yield-sharing, could limit stablecoin growth, with the market potentially reaching $1.6 trillion to $3.7 trillion by 2030.
Legislation under consideration in the U.S. Congress, such as the GENIUS Act, could further amplify this trend by mandating that stablecoin reserves be held in short-dated government debt.
This requirement would institutionalize the link between stablecoins and Treasuries, potentially driving demand for T-bills to $2 trillion, according to U.S. Treasury Secretary Scott Bessent.
Such regulations would also enforce anti-money laundering and anti-terror financing standards, enhancing the credibility of stablecoins as regulated digital assets.
However, concerns remain about the stability of stablecoins, with Citi noting over 1,900 instances in 2025 where stablecoins briefly deviated from their $1 peg, often due to redemption pressures or technical risks.
Other sources echo Citi’s findings.
A U.S. Treasury Borrowing Advisory Committee (TBAC) report from May 2025 highlighted that stablecoin growth has already contributed to a modest increase in T-bill demand, with issuers holding over $120 billion in short-dated Treasuries.
Bank of America analysts have also warned that accelerated stablecoin adoption could steepen the Treasury yield curve and disrupt bond market dynamics, potentially impacting bank deposits as funds shift to stablecoins.
Meanwhile, a World Economic Forum report emphasized the risks associated with stablecoins, including transparency issues and their potential use in illicit activities, underscoring the need for robust regulation.
The Citi report challenges the narrative that cryptocurrencies like Bitcoin threaten the dollar’s hegemony.
Instead, stablecoins are enhancing the dollar’s accessibility worldwide, particularly in regions with limited access to USD-denominated accounts.
As Ryan Rugg, head of Citi’s digital assets division, stated, stablecoins could align money movement with the pace of global trade, provided regulatory clarity is achieved.
With stablecoin transaction volumes surpassing Visa’s $3.9 trillion in 2024, (although that’s kind of like comparing apples to oranges as both have different use-cases), their growing influence is undeniable.
As the U.S. moves toward a clearer regulatory framework, stablecoins are poised to strengthen the dollar’s dominance while transforming the global financial landscape.