Tether and Circle Hold More U.S. Debt Than Germany, South Korea Combined

Tether and Circle, the two largest stablecoin issuers, have amassed U.S. Treasury holdings that now surpass those of major economies like Germany and South Korea combined. Tether, the issuer of USDT, holds over $100 billion in Treasury bills, ranking it as the 18th-largest global holder of U.S. debt, while Circle, the USDC issuer, holds between $45 billion and $55 billion in T-bills [1]. When combined, the two companies’ holdings exceed the U.S. debt holdings of Germany, South Korea, and the United Arab Emirates put together. Notably, Circle alone holds more U.S. debt than South Korea [1].

This shift reflects a broader transformation in global finance. Stablecoins—digital tokens pegged to the U.S. dollar and backed by reserves, primarily in U.S. government securities—have evolved from niche trading tools to significant financial instruments. Their growth has generated substantial demand for U.S. Treasury bills, with the combined stablecoin market capitalization currently at $270 billion and projected to reach $2 trillion by 2028 [1]. This trend is fueled by increasing adoption from institutions and corporations, including major players like Stripe, which acquired stablecoin startup Bridge for $1.1 billion in October [1].

The growth of stablecoins is also reshaping the landscape of U.S. Treasury demand. Traditional foreign holders, including China, have been reducing their Treasury positions. China’s holdings have declined from over $1 trillion a decade ago to $756 billion today [1]. This decline creates an opportunity for stablecoin issuers to act as consistent buyers of U.S. government debt, providing stability and confidence to the Treasury market. Yesha Yadav, a professor at Vanderbilt Law School specializing in cryptocurrency and bond markets, noted that "having stablecoin issuers always be there is a massive boost in terms of giving confidence to the Treasury [Department] about where to place debt" [1].

Stablecoins operate by maintaining a one-to-one peg with the U.S. dollar, backed primarily by U.S. Treasury bills. As users purchase stablecoins, issuers invest the proceeds in T-bills, effectively channeling digital demand into government securities. This mechanism ensures that every dollar of stablecoin growth translates into increased Treasury purchases [1]. Despite skepticism from some quarters, where critics compare stablecoin holdings to the much larger $7 trillion in money market funds, the trend is undeniably growing. The stablecoin industry is now the 18th-largest external holder of U.S. Treasuries, with its position strengthening over time [1].

While proponents argue that stablecoins could reinforce U.S. dollar dominance globally, similar to the offshore "Eurodollar" market in the 20th century, critics highlight potential financial stability risks. A report by Apollo noted that growing demand for U.S. Treasuries from stablecoin firms could help lower long-term interest rates and enhance U.S. sanctions enforcement, but it also warned of systemic risks if depositors lose confidence [1]. Citibank analysts also pointed out that if U.S. debt rises and T-bills experience volatility, it could temporarily shift trust in digital dollars to other currencies [1].

The rise of Tether and Circle as major U.S. debt holders marks a fundamental shift in global finance. These companies, born in the cryptocurrency space, now rival sovereign nations in their influence over government debt markets. This transition reflects not only the maturation of digital currencies but also a shift in how global demand for U.S. debt is being fulfilled. As stablecoin adoption continues to expand, their role in Treasury markets is expected to grow, potentially reshaping traditional financial systems and liquidity management on Wall Street [1].

Source: [1] Tether and Circle Now Hold More US Debt Than Germany, South Korea Combined (https://coinmarketcap.com/community/articles/689764be74181e73e0d359ad/)