Peter Schiff Warns Stablecoins May Curb Treasury Demand And Boost Long-Term Yields

Renowned economist and gold advocate Peter Schiff has challenged the prevailing optimism surrounding stablecoins, asserting that they do not boost demand for U.S. Treasuries as commonly assumed. Instead, he warns that these digital assets may redirect liquidity, raise long-term yields, and potentially drive up mortgage rates. His critique, shared through a series of posts on X, has sparked debate among market participants and policymakers [1].

Schiff’s argument centers on the mechanism by which stablecoin issuers allocate funds. While they often hold short-term U.S. Treasury securities as collateral, Schiff argues that these purchases do not represent new demand for government debt. Rather, they redirect capital that might otherwise flow into traditional money market accounts, such as Treasury-focused mutual funds. This dynamic, he explains, benefits the issuing platforms at the expense of ordinary investors, who typically forgo interest income in favor of stablecoin-backed returns [1].

The implications extend beyond yield distribution. Schiff warns that the concentration of capital in short-term Treasuries via stablecoins could leave long-term bonds underfunded. A decline in demand for these longer-duration assets might push up yields, which in turn could affect mortgage rates and corporate borrowing costs. He emphasizes that capital locked into stablecoins is not available for productive lending in the real economy, potentially stifling growth and worsening credit conditions for households and businesses [1].

While Schiff's concerns remain a minority view, they contrast sharply with the bullish stance held by major financial institutions. BlackRock, for instance, has identified stablecoins as one of the "mega forces" reshaping financial markets, citing their efficiency and global liquidity potential. However, Schiff cautions that the growing influence of stablecoins could disrupt traditional lending models and destabilize key financial segments if left unaddressed [1].

His critique gains particular relevance amid intensifying regulatory scrutiny. Following the signing of the GENIUS Act—the first major U.S. crypto legislation—by President Donald Trump, regulators are taking a closer look at stablecoin mechanisms and their broader economic impact. Schiff’s warning serves as a contrarian counterpoint to the prevailing optimism, highlighting the need for a more nuanced understanding of how stablecoins interact with monetary policy and investor behavior [1].

In an evolving financial landscape, Schiff’s position raises critical questions about the role of stablecoins in capital allocation and systemic risk. As the sector continues to expand, the debate over its potential benefits and pitfalls is likely to remain a key topic among investors, policymakers, and financial analysts.

Source: [1] “Don’t Be Fooled!” — Peter Schiff Says Stablecoins Won’t Save U.S. Treasuries (https://coinmarketcap.com/community/articles/688b08adeccca1364c69586f/)