The U.S. government is quietly turning to stablecoin issuers as a major buyer of Treasury bills, a shift that could reshape how America finances its $40 trillion national debt. Stablecoin companies like Tether and Circle hold massive amounts of short-term government securities, and Treasury Secretary Scott Bessent has explicitly cited them as prime customers for new 90-day Treasury bill offerings. This arrangement serves a dual purpose: it gives stablecoin issuers the liquid, safe assets they need to back their tokens, while providing the government with a steady stream of buyers for its debt.

Why Are Stablecoins Suddenly Central to U.S. Fiscal Policy?

The connection between stablecoins and Treasury debt stems from the GENIUS Act, legislation signed by President Trump last year that requires U.S.-licensed stablecoin issuers to hold easily convertible assets. These assets must be available in case stablecoin holders decide to redeem their tokens for dollars en masse. Treasury bills fit this requirement perfectly, and stablecoin issuers have become significant holders. Tether, which issues USDT, reported holding $115 billion in short-term Treasuries and another $25 billion in reverse repurchase agreements in its most recent quarterly attestation. Circle, which issues USDC, reported $21.6 billion in Treasury bills and $42.3 billion in repurchase agreements.

This arrangement addresses a pressing problem for the U.S. government. With national debt exceeding $40 trillion, Treasury Secretary Bessent announced a doubling of the government's bond buyback budget from $2 billion to $4 billion. However, that intervention only lowered yields for about 48 hours, forcing officials to consider tapping into the Treasury's general account, which holds nearly $1 trillion. Stablecoin issuers represent a more stable, ongoing source of demand for government debt.

Sen. Bill Hagerty, a co-author of the GENIUS Act, made the strategic intent explicit this week. He stated that he wrote the bill "in part to cement dollar dominance in the digital arena and drive structural demand for U.S. Treasuries." Hagerty expressed hope that the downstream effect on borrowing costs and affordability could reshape America's fiscal trajectory.

How Are Regulators Implementing Stablecoin Rules?

The Treasury Department is racing to finalize rules for the GENIUS Act before a January 18, 2027 deadline. On August 17, Treasury announced it was seeking public comments on proposed rulemaking efforts. The Office of the Comptroller of the Currency (OCC), a Treasury agency, opened its own comment period in February and is targeting a final rule by November so it can begin processing applications in the new year.

The regulatory framework includes several key components:

• Licensing Requirements: Stablecoin issuers must hold a U.S. federal or state-issued license to participate in America's financial system, with only U.S.-approved stablecoins eligible for offering or sale via U.S. service providers as of July 18, 2028.
• Compliance Definitions: Treasury is proposing rules that clarify what it means to "issue a payment stablecoin in the United States" and define what constitutes a stablecoin offer or sale to people in the U.S.
• Foreign Stablecoin Oversight: U.S.-licensed digital asset service providers must ensure that any foreign stablecoin issuer has the technological capacity to comply with U.S. law enforcement requests regarding token use.
• Anti-Money Laundering Standards: Stablecoin issuers must implement know-your-customer (KYC) and anti-money laundering (AML) procedures, though the scope of these obligations remains contested.

Interested parties must submit comments on Treasury's proposed rules by October 19.

What Concerns Are Crypto Companies Raising About the Rules?

The crypto industry is pushing back against certain provisions of the GENIUS Act implementation, particularly around AML and sanctions-evasion requirements. In June, venture capital firm Paradigm and the Hyperliquid Policy Center filed a joint comment arguing that regulators should distinguish between primary market activities (where stablecoin issuers directly issue or redeem tokens) and secondary market activities (like decentralized finance platforms and digital wallets where issuers have no direct control).

"Forcing stablecoin issuers to monitor activity on secondary markets, where AML/KYC is can be an afterthought, could result in issuers pulling U.S.-regulated stablecoins out of DeFi and creating a void filled by unregulated, offshore, non-dollar alternatives," the letter argued.

Paradigm and Hyperliquid Policy Center, joint comment filing

The Blockchain Association echoed this concern this week, urging Treasury and its various agencies to clarify definitions of "account," "customer," and "digital asset service provider" to ensure that issuers' AML/KYC obligations don't extend to downstream peer-to-peer transactions where stablecoin issuers have no involvement. The association warned that failure to follow its advice could "cripple" the crypto sector.

How Are International Regulators Approaching Stablecoins?

While the U.S. focuses on leveraging stablecoins for fiscal purposes, other countries are taking different regulatory approaches. The U.K. government announced Thursday that it will give the Bank of England a new objective of ensuring that "UK payments regulation keeps pace with technological change and create conditions for innovation." This new payment innovation objective will sit below the Bank of England's primary objective of ensuring financial stability.

City Minister Lucy Rigby stated that the new role will help the Bank of England "drive innovation in payments and digital finance, ensuring that the UK remains a global leader in financial services." Rigby specifically highlighted tokenization and distributed ledger technology, commonly known as blockchain, as among the digital payments developments with "the potential to transform financial markets around the globe." The government expects to formalize this new objective via amendments to the Financial Services and Markets Bill, which the House of Lords will debate on September 7 and 9. Assuming the Bill proceeds, the Bank of England will be required to update Parliament annually on the progress of its innovation assignment.

Meanwhile, South Korea is taking a pragmatic approach by partnering with established payment networks. Shinhan Financial Group announced Wednesday that it has signed a strategic business agreement with Visa to collaborate on stablecoins, artificial intelligence, and business-to-business payments for its "future finance" business. Shinhan plans to utilize Visa's stablecoin platform to verify issuance, remittance, and redemption, and jointly design a Korea-specific business model tailored to the domestic financial environment.

"Through this agreement, we have expanded our long-standing partnership with Visa to the broader digital finance sector. Going forward, we will combine Shinhan's financial capabilities with Visa's global infrastructure to jointly design new future finance models and deliver differentiated financial experiences to our customers," said Jin Ok-dong, CEO of Shinhan Financial Group.

Jin Ok-dong, CEO of Shinhan Financial Group

Shinhan and Visa also plan to integrate stablecoins into joint pilot projects involving card payment settlements, the development of AI-based future payment models, and the expansion of business-to-business and business-to-consumer payment businesses. Shinhan, which reported net income of 1.82 trillion won (approximately $1.3 billion) in the last quarter, is among South Korea's top financial institutions driving digital transformation. These developments come amid local legislative efforts to establish the Digital Asset Basic Act, a broad digital asset framework covering stablecoins, virtual asset service provider licensing, and crypto exchange-traded funds.

The divergence in regulatory approaches reflects a broader global reality: stablecoins are no longer a niche crypto experiment but a critical piece of financial infrastructure that governments and regulators must actively shape. Whether the U.S. strategy of using stablecoins to absorb Treasury debt will succeed remains to be seen, but the intent is clear. Stablecoins have moved from the margins of finance into the center of how nations manage money, payments, and debt.