Tom Lee said stablecoins are “becoming integral” to financial system function following a Federal Reserve Bank of San Francisco report showing stablecoin issuers increased their U.S. Treasury holdings by $200 billion over five years, partially offsetting a decline in Chinese demand.
Integral to System Liquidity
In a recent post on X, Lee reacted to the San Francisco Fed’s data on digital assets, writing, “Stablecoins are becoming integral to financial system function and liquidity – are you bullish enough?”
His comments accompanied a summary of the Federal Reserve Bank of San Francisco’s Economic Letter 2026-26, which details how stablecoin issuers are becoming a new source of demand for U.S. government debt.
To maintain a one-to-one parity with the U.S. dollar, major stablecoin issuers must hold highly liquid assets, primarily short-term Treasury securities. The research notes that the two largest stablecoins, Tether (CRYPTO: USDT) and USD Coin (CRYPTO: USDC), make up more than 80% of the market capitalization and have grown their Treasury holdings more than tenfold over the past five years.
Offsetting China’s Debt Reduction
The Federal Reserve research indicates that the share of U.S. debt held by foreign entities has fallen steadily from a peak of over 50% around 2008 to roughly 30% in early 2026.
This drop is largely attributed to the Chinese government diversifying its asset portfolio away from U.S. debt.
Over the past five years, stablecoin issuers have expanded their Treasury holdings by approximately $200 billion. The San Francisco Fed notes that this surge equates to more than 40% of the total decline in China’s Treasury holdings during the same period.
Outpacing Foreign Governments
The appetite of stablecoin issuers for U.S. debt is growing rapidly compared to major sovereign nations. According to the San Francisco Fed, stablecoin issuers have increased their holdings of short-term Treasury securities since 2023 by a larger margin than Japan, which currently stands as the largest non-U.S. holder of Treasury securities.
If the current trajectory continues, researchers project that stablecoin issuers’ demand for short-term Treasury securities could nearly double to approximately $400 billion by the end of 2030.
Price Action: At the time of writing, USDT was exchanging hands at $0.9998, up 0.10% over the last 24 hours. USDC was unchanged at $0.9999 at the last check.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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