US Treasury Secretary Backs Crypto: Stablecoins Are a New Weapon for Dollar Hegemony and New Buyers of U.S. Treasuries

Written by: Xiaobing, TechFlow

On October 27, U.S. Treasury Secretary Scott Bessent appeared at The Shed in Manhattan, New York, for a conversation with Ripple CEO Brad Garlinghouse.

The venue was Ripple's annual Swell conference, but the topics went far beyond one company's business scope.

On stage, Bessent placed crypto within a grand narrative framework:Like AI and semiconductors, it is a key battleground in the U.S.-China technology competition; USD stablecoins are not speculative tools but technological infrastructure for maintaining the dollar's global reserve currency status; and stablecoin issuers are becoming an important new buying force for U.S. Treasuries.

What did Bessent say?

The core arguments can be distilled into three sentences:

One, the power basis for reserve currency status is shifting from military strength to technology.

In the conversation, Bessent noted that historically, the global status of major currencies has been underpinned by military power, but that logic is changing, with technological leadership replacing military strength as the cornerstone of reserve currency status.Crypto, AI, and semiconductors together form the technological foundation for the United States in this competition.

Two, stablecoins are a pipeline for the dollar to penetrate emerging markets worldwide.

Currently, more than 90% of stablecoins are denominated in USD. Bessent believes that for emerging-market countries with unstable local currencies and high inflation, USD stablecoins provide a channel for accessing dollars outside the traditional banking system, expanding the dollar's actual global usage.

Three, stablecoins will become an important funding source for the U.S. Treasury.

Under the GENIUS Act (the enacted federal stablecoin regulatory framework), payment stablecoin issuers must hold cash, eligible U.S. Treasuries, or other permitted liquid reserve assets at a ratio of at least 1:1.

The logic is straightforward:Every stablecoin minted corresponds to demand for purchasing U.S. Treasuries. The larger the stablecoin market, the more buyers of U.S. Treasuries.

Bessent even compared the GENIUS Act to the National Currency Act signed by Lincoln in 1863, viewing the two as institutional reforms of comparable historical significance.

He also expressed regret that the CLARITY Act (broader crypto market structure legislation) failed to pass Congress, with the Senate voting 49:50 to reject it on September 15, 11 votes short of the 60-vote threshold. But Bessent said the Treasury Department has significant authority to work with the SEC and CFTC to advance a compliance framework for the crypto industry through regulatory action and prevent crypto companies from being debanked by the banking system.

Stablecoins + Treasuries: A Major Transaction Underway

Bessent's view that stablecoins are a Treasury funding source is not without foundation.

There is a clear data chain behind it:

The current total market capitalization of stablecoins is about $300 billion, with Tether (USDT) and Circle (USDC) together accounting for about 90%, and the two issuers holding approximately $170-$220 billion in U.S. Treasuries and related assets.

Throughout 2024, stablecoin issuers purchased about $40 billion in short-term Treasury bills, a scale comparable to that of sovereign buyers such as Japan and Singapore.

Under the GENIUS Act, reserves for compliant stablecoins must be invested in short-term Treasuries with maturities of 93 days or less. This forms a closed loop with another of Bessent's strategic moves. In August, he announced a doubling of the scale of long-term Treasury buybacks, financed by issuing more short-term Treasury bills, known as the Treasury Twist.

The new demand created by stablecoins lands precisely on the short end of the Treasury market.

Standard Chartered forecasts that the stablecoin market will reach $2 trillion by 2028, implying about $1 trillion in new short-term Treasury demand. Bessent himself said at a Senate hearing that the market could exceed this forecast.

A research paper published by the IMF in March 2026 found that stablecoin demand shocks have begun to have a measurable impact on Treasury yields, with each 1% shock in market capitalization growth compressing yields by about 0.5 basis points.

From the U.S. Treasury's perspective, this is a rare positive-sum game:Stablecoin expansion → increased actual global use of the dollar → higher demand for short-term Treasuries → lower government funding costs → strengthened reserve currency status of the dollar.

And all of this requires no Fed rate cuts, no increased holdings by foreign central banks, only more people around the world using USD stablecoins.

The other side of the coin

But what Bessent did not say on stage is equally important.

Stablecoin demand for Treasuries is price-insensitive: regardless of yield levels, issuers must hold reserves. This is an advantage in calm markets (a steady source of demand) but can become a risk during market turmoil. If stablecoins face large-scale redemptions, issuers may be forced to sell large amounts of short-term Treasuries in a short period, potentially exacerbating market volatility. The Bank of England has already warned about this.

The failure of the CLARITY Act also leaves a practical question: stablecoins now have a federal framework (the GENIUS Act), but broader crypto market structure—who regulates exchanges, how tokenized securities are classified, and where the compliance boundaries of DeFi protocols lie—still has no legislative answer.

Bessent said this could be addressed through regulatory actions by the SEC and CFTC, but JPMorgan noted,Administrative rules lack the durability of legislation and can be easily overturned by the next administration.

This means the crypto vision Bessent outlined has a time window: if regulatory actions are not codified into law during this administration, the stability of these rules will be compromised.

But without question,The United States is building a digital financial order centered on USD stablecoins.

The GENIUS Act provides the legislative framework, the OCC issues bank charters, the Treasury Department defines the strategic role, and the SEC and CFTC establish regulatory guardrails. Ripple has obtained a bank charter, Tether and Circle hold hundreds of billions of dollars in U.S. Treasuries, and Robinhood is issuing tokenized stocks on-chain—these seemingly disparate events are converging into the same river.

Bessent summed up the direction of this river in one sentence:“The United States will win in digital assets and, as a result, have a stronger dollar.”

Source: TechFlow