Stablecoin
|6 min ReadWhy Wall Street Doubts The $3 Trillion Stablecoin Bet
Carter Hayes
Senior Analyst
Published
Jan 16, 2026
The Genius Act turned a long running crypto talking point into official US policy. Dollar stablecoin issuers now have a formal framework and a political story: help fund the government by parking reserves in Treasury bills, grow to 3 trillion dollars by 2030, and become a new structural buyer of short term debt. For traders, this sounds like a historic alignment between crypto rails and the dollar system. For Wall Street rate desks, the pitch still looks more like a reshuffle than a revolution.
The Promise: A New Buyer For Short Term Debt
At a basic level, the logic is simple. Stablecoins are tokenized dollars that live on blockchains but are backed by traditional assets. Under the new law, issuers must hold reserves in bills and similar cash equivalents. US Treasury Secretary Scott Bessent has argued that if dollar stablecoins grow from roughly 300 billion dollars today to around 3 trillion by the end of the decade, the extra demand would let Washington issue more bills, lean less on long dated bonds, and ease pressure on mortgage and corporate borrowing costs.
The numbers already look large on paper. Research from the Kansas City Fed puts stablecoin holdings of T-bills near 125 billion dollars, close to 2 percent of the outstanding bill market at the end of last year. The Bank for International Settlements estimates that issuers bought roughly 40 billion dollars of bills in 2024 alone. For a tech sector that started with cypherpunk mailing lists, those are serious flows.
Supporters inside the administration are comfortable talking about stablecoins as a multi trillion dollar pillar of dollar demand, comparable in spirit to global reserve recycling and quantitative easing. They imagine wallets around the world holding tokenized dollars instead of local bank deposits, all of it quietly funding US deficits through bill purchases.
Why The Demand Boost May Be Illusory
Strategists at JPMorgan, Deutsche Bank, Goldman Sachs and others are far more cautious. Their first objection is mechanical: where does the money come from. Analysts point out that inflows into stablecoins are likely to draw from four existing pools of dollar demand: money market funds, bank deposits, physical cash and foreign dollar holdings.
If yield seeking investors move from government money funds into stablecoins, the system has not created a new buyer of bills. It has simply changed the legal wrapper that holds the same assets. Money funds currently own roughly 3.4 trillion dollars of Treasuries. If a portion of that rotates into stablecoins that must also hold bills, the net demand for US debt is close to zero. The names on the cap table changed. The aggregate bid did not.
There is also a pricing constraint. The Genius Act forbids stablecoins from paying interest. That makes them unattractive to domestic investors who can earn yield in deposits or money funds instead. As a result, Wall Street desks doubt the most optimistic adoption curves. JPMorgan expects market size to reach perhaps 700 billion dollars in the next few years, not several trillion. Citigroup’s 4 trillion dollar bull case is treated as a scenario, not a baseline.
Skeptics also highlight substitution effects at the policy level. If stablecoins end up “sequestering” more dollars in circulation, the Federal Reserve may respond by shrinking its own portfolio. CIBC strategist Michael Cloherty notes that reserves and bills sit on opposite sides of the Fed balance sheet. If the liability side grows via tokenized dollars, the asset side may need to contract, including a 4.2 trillion dollar Treasury portfolio. In that world, a large share of stablecoin demand simply replaces the Fed as a holder rather than adding to total buying power.
Global Risks And The Threat Of Pushback
Policy makers inside the US increasingly talk about stablecoins as a way to export dollars more efficiently. Fed Governor and White House chief economist Stephen Miran has compared the potential foreign demand for dollar coins to the “savings glut” that fueled earlier waves of Treasury buying. In his framing, overseas savers might accept a zero yield if they get clean, round the clock access to dollar assets through regulated tokens.
That vision triggers alarms in emerging markets. Standard Chartered estimates that migration into dollar stablecoins could drain roughly 1 trillion dollars of deposits from banks in developing countries by 2028. Such outflows would tighten local credit, weaken domestic currencies and almost certainly provoke regulatory countermeasures. If capital controls already limit access to conventional dollars, officials can extend those tools to dollar coins as well.
Major central banks are not standing still. The European Central Bank and the People’s Bank of China are racing to deploy their own central bank digital currencies partly to blunt competition from private dollar tokens. For them, a 3 trillion dollar stablecoin stack is not just a funding story for Washington. It is a direct challenge to monetary sovereignty.
There is also the blunt arithmetic of US debt. Federal obligations have already climbed above 30 trillion dollars and are projected to rise by another 22 trillion over the next decade. Even Deutsche Bank’s relatively constructive scenario, where stablecoins grow by around 1.5 trillion dollars over five years and add roughly 200 billion dollars a year in incremental bill demand, barely dents the broader funding wall. A heavier reliance on short term paper would also make the government more sensitive to rate spikes and rollover risk.
For crypto traders, the signal is mixed. The new US law locks in a regulatory path and formalizes the link between leading stablecoins and the Treasury market, which is a huge step for the asset class. At the same time, the street’s message is clear: token design does not magically solve the structural math of deficits, and any stablecoin boom will collide with bank balance sheets, foreign regulators and the Fed’s own portfolio decisions.
Stablecoins will almost certainly keep growing and will keep tightening their loop with short dated Treasuries. That is positive for on chain liquidity and for the dollar’s digital reach. It is not, at least in Wall Street’s current view, a free 3 trillion dollar gift to US funding.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.