Stablecoins as a Liquidity Buffer and Treasury Buyer: A $1T Opportunity by 2028

The stablecoin market is poised to become a cornerstone of global finance, with projections suggesting it could reach $1.2 trillion by 2028 according to research. This growth is driven by regulatory clarity, institutional adoption, and the unique role stablecoins play as liquidity buffers and Treasury buyers. As the financial system evolves, stablecoins are reshaping capital reallocation strategies and enhancing market resilience, creating a compelling investment opportunity.

Market Growth and Regulatory Catalysts

The U.S. GENIUS Act, passed in July 2025, has been a pivotal development, mandating that stablecoins be fully backed by fiat USD and short-duration Treasury instruments. This regulatory framework has legitimized stablecoins as a critical component of the financial system, accelerating their adoption by institutions and consumers. By mid-2025, stablecoin supply had already surpassed $238 billion, with projections indicating a potential $3 trillion market cap by 2030 under aggressive growth scenarios according to analysis.

Coinbase Institutional's stochastic model underscores this trajectory, forecasting $1.2 trillion by 2028 based on historical growth patterns and policy developments.

The market's expansion is further fueled by its integration into cross-border payments, remittances, and financial infrastructure, with U.S. dollar-denominated stablecoins leading the charge.

Strategic Capital Reallocation and Treasury Market Dynamics

Stablecoins are redefining institutional treasury strategies by offering faster, more efficient liquidity management. For instance, companies leveraging stablecoins like USDC or USDP can reduce settlement times from days to hours, minimizing float risk and enhancing capital efficiency. This shift is particularly impactful in emerging markets, where traditional correspondent banking systems are slow and costly.

A key driver of this transformation is the growing demand for short-term U.S. Treasuries by stablecoin issuers. As of January 2025, Circle, the largest U.S.-based stablecoin issuer, held $20 billion in Treasury bills, comprising 43% of its assets. If all stablecoin issuers mirrored this allocation, a $250 billion market would generate $125 billion in Treasury demand-nearly 2% of the $6 trillion in outstanding bills according to analysis. Projections suggest this could expand to $500 billion by 2028 according to research, with Standard Chartered estimating $2 trillion according to analyst reports. Such growth would redirect capital from bank deposits into Treasuries, altering traditional credit dynamics while bolstering Treasury market liquidity.

Case Studies: Tether, USDC, and Market Resilience

The two largest stablecoins, Tether (USDT) and USD Coin (USDC), exemplify divergent capital reallocation strategies. Tether's reserves include corporate bonds and precious metals, while USDC's peg is tightly correlated with the Secured Overnight Financing Rate (SOFR) according to research. During the April 2025 tariff shock, stablecoin-driven Treasury purchases helped stabilize markets by absorbing liquidity pressures according to analysis. However, this also exposed vulnerabilities: during the March 2020 pandemic-driven liquidity crunch, Tether's reliance on less-liquid assets exacerbated volatility according to financial analysis.

The GENIUS Act has since mitigated such risks by enforcing full reserve backing, but challenges remain. For example, stablecoin issuers are legally barred from making direct loans, unlike traditional banks. This restriction could reduce credit availability, particularly for small businesses, as funds shift from deposits to stablecoins according to research.

Systemic Risks and Opportunities

While stablecoins enhance market resilience by providing a buffer during stress, their growth introduces systemic risks. A sudden run on stablecoins could trigger mass redemptions, destabilizing Treasury markets due to their non-24/7 operation according to research. Additionally, the shift from foreign holders (e.g., China and Japan) to stablecoins has altered Treasury demand dynamics, with stablecoins now accounting for $200 billion in holdings according to market analysis.

However, these risks are counterbalanced by opportunities. Stablecoins' demand for Treasuries could offset declining foreign official holdings, ensuring continued market liquidity according to analyst research. Moreover, their integration into global payment systems positions them to dominate cross-border transactions, further solidifying their role as a foundational financial tool according to market insights.

Conclusion: A $1T Investment Thesis

The confluence of regulatory clarity, institutional adoption, and Treasury market integration positions stablecoins as a $1 trillion opportunity by 2028. Investors should focus on issuers with robust reserve management practices, such as Circle and USDC, while monitoring systemic risks like liquidity constraints and credit availability. As stablecoins evolve from speculative assets to essential infrastructure, their impact on capital reallocation and market resilience will only deepen, offering a unique vantage point in the digital finance revolution.