📌 Stablecoin Expansion Does Not Necessarily Lower Short-Term Treasury Yields
Interpreting an increase in stablecoin issuance directly as “new dollar liquidity” can easily confuse the form in which funds exist with the total amount of funds. The dollars used to purchase stablecoins were usually already in bank deposits, money market funds, or brokerage cash accounts. They have not left the dollar system; they have merely moved from holders’ accounts into the stablecoin issuer’s reserve allocation.
This means that when stablecoin issuers buy short-term U.S. Treasuries, they do change how assets are held in specific accounts, but this does not necessarily bring in an equivalent amount of new funds. The original funds may already have been indirectly allocated to money market instruments or other cash-like assets; what stablecoin reserves are replacing is the key to assessing the incremental demand for short-term Treasuries.
Another constraint is that short-term U.S. Treasuries already have a broad global buyer base. Even if buying from stablecoin reserves increases, it may not be sufficient on its own to change marginal interest rates. To verify its impact, it is necessary to examine whether subscription funds mainly come from deposits, money market funds, or other assets, and whether short-term Treasury supply and regulatory constraints are changing simultaneously.
For the relevant issuers, growth in asset scale may still expand the scale of reserve management; however, the evidence is insufficient to extrapolate this process into an increase in dollar liquidity or a sustained decline in short-term Treasury yields.
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