Key Highlights
- US government debt has risen from about 35% of GDP in 2006 to 100%, while the investor base has shifted.
- Foreign investors’ share of US Treasury holdings fell from more than 50% in the late 2000s to about 30% by early 2026.
- Stablecoin issuers could hold roughly $400 billion in short-term US Treasury bills by 2030, according to the San Francisco Fed’s projected trajectory.
Foreign Share of US Treasury Financing Declines
The increase in global debt was actually reduced during the period under review. The additional amount was less than half of the $21 trillion recorded during the previous year, a change the Institute of International Finance attributed to high interest rates, rising debt-servicing costs, increased energy costs and the negative effect of the Iran conflict on investor sentiment.
At the same time, the institutions and investors financing Washington are changing. A letter written by economists at the Federal Reserve Bank of San Francisco and released on September 28 examined the changing creditor base of the US Treasury. US government indebtedness has climbed from approximately 35% of gross domestic product in 2006 to 100%, while the composition of Treasury lenders has shifted significantly.
Foreign investors were traditionally the largest creditors of the US government. According to the Federal Reserve Bank of San Francisco economists, their share fell from more than 50% at its peak in the late 2000s to approximately 30% by early 2026. Foreign governments recorded the sharpest reduction. They were the exclusive purchasers of US Treasuries in the 1970s, but their share had declined to only 40% by early 2026.
The source attributes this decline to China, stating that Chinese purchases of US Treasury securities were cut in half in mid-2026. As foreign government participation weakened, private buyers expanded their role in the Treasury market.
Stablecoin Issuers Become a Growing Treasury Buyer
Stablecoin issuers are identified in the San Francisco Fed letter as a new category of Treasury buyers. Since 2023, stablecoin companies have accumulated short-term US Treasury securities at a faster pace than Japan, the largest foreign holder of US government debt. The study documents the buildup over the past five years, while Cryptopolitan has previously estimated the increase at approximately $200 billion.
The demand is closely linked to how stablecoins are structured. Stablecoin holders are offered the ability to exchange their tokens for dollars on a dollar-for-dollar basis. To meet potential redemptions, issuers therefore hold reserves in assets that are considered low risk and highly liquid, with short-term Treasury bills representing a major portion of those reserves.
The San Francisco Fed compared the arrangement with a bank that must maintain sufficient cash reserves to cover withdrawals. The letter also noted that concerns about convertibility could trigger a run, making the quality and liquidity of stablecoin reserves particularly important.
US Law Supports Treasury-Backed Stablecoin Reserves
This reserve structure is now required under US law. The GENIUS Act, enacted in 2025, created the first federal regulatory framework for payment stablecoins. The law requires issuers to back tokens one-for-one with eligible assets, including Treasury bills, according to an August analysis by Brookings economists Nellie Liang and Brent Neiman.
The total stablecoin market was valued at approximately $270 billion as of June 2026. As the market expands, issuers’ need for liquid reserve assets could create a larger and more consistent source of demand for short-term US government debt.
Stablecoin Treasury Demand Could Reach $400 Billion by 2030
The San Francisco Fed expects demand from stablecoin issuers for short-term Treasury bills to continue rising. If the current trajectory persists, issuer holdings could nearly double by 2030 and reach approximately $400 billion.
That amount would remain well below Washington, DC’s borrowing requirement, but the economists said it could still influence the market. Studies by the Bank for International Settlements have shown that strong stablecoin demand can affect short-term bond yields. The International Monetary Fund has similarly described stablecoins in its report on tokenization as a rapidly expanding form of quasi-money backed by securities.
Why This Matters
The changing ownership of US Treasury debt shows that Washington is relying on a broader mix of creditors as foreign participation declines. Stablecoin issuers are becoming increasingly important because their business model requires substantial holdings of liquid, dollar-denominated reserve assets.
For the Treasury market, the growth of stablecoins could provide an additional source of demand for short-term government securities. However, the scale of that demand remains smaller than the US government’s overall borrowing needs. The next key development will be whether stablecoin issuance and reserve holdings continue expanding along the trajectory projected by the San Francisco Fed.
Frequently Asked Questions
Why do stablecoin issuers buy US Treasury bills?
Stablecoin issuers hold short-term Treasury bills because they need low-risk, highly liquid reserves to support the dollar-for-dollar redemption of tokens.
How has the foreign share of US Treasury ownership changed?
Foreign investors’ share fell from more than 50% in the late 2000s to about 30% by early 2026. The share held by foreign governments also declined, reaching 40% by early 2026.
How much Treasury debt could stablecoin issuers hold by 2030?
If the current trend continues, the San Francisco Fed estimates that stablecoin issuers’ demand for short-term Treasury bills could nearly double to roughly $400 billion by 2030.
