Tether and Circle Hold Nearly $150 Billion in US Treasuries

Stablecoin Growth and US Treasury Demand

Speaking at Queen’s University Belfast, Wilkins stated that the rising adoption of dollar-linked stablecoins reinforces the greenback by facilitating cross-border settlements and expanding access to dollar assets outside the United States. Stablecoins currently account for a market totaling more than 300 milliards de dollars in circulation, with the dollar representing 98% of that total value. According to data cited by Wilkins, major stablecoin issuers acquired approximately 33 milliards de dollars in US government debt over the course of the year. Wilkins noted that the relationship functions in both directions. At a sufficient scale, massive redemptions of stablecoins could force issuers to liquidate holdings of Treasury bills, which might amplify volatility across a financial market that remains under strain.

Implications for Global Monetary Policy and the Euro

While the expansion of dollar-denominated stablecoins supports US currency dominance, it presents distinct policy challenges for other jurisdictions. Isabel Schnabel, a member of the executive board of the European Central Bank, warned during a Bank of Korea conference in Seoul that the rising use of stablecoins could compromise the monetary policy sovereignty of certain nations and weaken the international role of the euro. Schnabel explained that the dominance of the dollar is expanding not necessarily due to stronger economic fundamentals, but because of network effects, scale, and first-mover advantages. Data from the International Monetary Fund shows that the dollar’s share of global foreign exchange reserves dropped below 57% last year, down from 70% at the turn of the century. Schnabel cautioned that widespread adoption of dollar stablecoins in countries lacking institutional credibility could trigger a self-reinforcing cycle. In those regions, local economic agents might shift away from domestic currency toward digital dollars, impairing central bank transmission mechanisms. Furthermore, Schnabel noted that persistent dollar stablecoin dominance could eventually restrict the euro’s role in tokenized finance and the broader international monetary system.

Regulatory Responses in the United Kingdom

Regulatory bodies are moving to establish formal frameworks for digital assets as market adoption accelerates. Within the United Kingdom, sterling-denominated stablecoins have encountered slower adoption, prompting financial authorities to introduce supportive measures. The Financial Conduct Authority initiated a regulatory sandbox to test prospective stablecoin issuers and finalized official rules for stablecoin issuance in June. Concurrently, the Bank of England is conducting technical trials to evaluate how stablecoins and a simulated digital pound might interact within commercial cross-border payments. These regulatory steps reflect a shift toward a more accommodating supervisory stance following earlier industry warnings that initial policy proposals might restrict financial innovation.