New Financial Experiment Under the US Debt Crisis: Stablecoins Reshape the Global Monetary System

A financial experiment triggered by a $36 trillion treasury bond crisis is underway, attempting to transform the cryptocurrency space into a new buyer of U.S. debt, while the global monetary system is also quietly being reshaped.

In the U.S. Congress, legislation known as the "Beautiful Law" is moving quickly. Deutsche Bank's latest report defines it as the U.S. response to its massive debt, the "Pennsylvania Plan"—to incorporate the digital dollar into the national debt financing system by mandating the purchase of U.S. Treasuries with stablecoins.

This bill forms a policy combination with the "GENIUS Act," which has mandated that all USD stablecoins must be 100% backed by cash, U.S. Treasury securities, or bank deposits. This marks a fundamental shift in the regulation of stablecoins. The bill requires stablecoin issuers to hold reserves of 1:1 USD or highly liquid assets (such as short-term U.S. Treasury securities) and prohibits algorithmic stablecoins, while establishing a dual regulatory framework at both federal and state levels. Its goals are clear:

• Alleviating pressure on US debt: Mandatory allocation of stablecoin reserve assets to the US debt market. It is predicted that by 2028, the global market value of stablecoins will reach $2 trillion, with $1.6 trillion flowing into US debt, providing new financing channels for the US fiscal deficit.

• Consolidating the Dollar's Hegemony: Currently, 95% of stablecoins are pegged to the USD. The bill creates a closed loop of "USD → stablecoin → global payments → US debt repatriation," reinforcing the dollar's "on-chain minting authority" in the digital economy.

• Promoting expectations of interest rate cuts: The report points out that the passage of the bill puts pressure on the Federal Reserve to cut interest rates in order to reduce the financing costs of U.S. Treasury bonds, while guiding the dollar to weaken to enhance the competitiveness of U.S. exports.

U.S. Treasury Debt Bottleneck, Stablecoins Become Policy Tools

The total amount of U.S. federal debt has exceeded $36 trillion, with principal and interest repayments due in 2025 reaching as high as $9 trillion. In the face of this "debt dam", the government urgently needs to open new financing channels. Meanwhile, stablecoin, a financial innovation that once floated on the fringes of regulation, has unexpectedly become a lifeline.

According to signals from a Boston money market fund seminar, stablecoins are being nurtured as a "new buyer" in the U.S. Treasury market. A CEO of a global investment advisory firm candidly stated: "Stablecoins are creating significant new demand for the Treasury market."

Data shows: The total market value of stablecoins is $256 billion, of which about 80% is allocated to U.S. Treasury bills or repurchase agreements, amounting to about $200 billion. Although it accounts for less than 2% of the U.S. bond market, its growth rate has caught the attention of traditional financial institutions.

A certain bank predicts that by 2030, the market value of stablecoins will reach between 1.6 and 3.7 trillion USD, and by then, the scale of US Treasury bonds held by issuers will exceed 1.2 trillion USD. This volume is enough to rank among the largest holders of US Treasury bonds.

Stablecoins have become a new tool for the internationalization of the US dollar, with leading stablecoins holding nearly $200 billion in US Treasuries, accounting for 0.5% of US national debt; if the scale expands to $2 trillion (80% allocated to US Treasuries), the holdings will exceed those of any single country. This mechanism may:

• Distorted financial markets: A surge in short-term U.S. Treasury demand depresses yields, exacerbating the steepening of the yield curve and weakening the effectiveness of traditional monetary policy.

• Weaken capital controls in emerging markets: The cross-border flow of stablecoins bypasses the traditional banking system, undermining the ability to intervene in exchange rates (such as the crisis in Sri Lanka in 2022 due to capital flight).

Bill Scalpel, Financial Engineering of Regulatory Arbitrage

The "Beautiful Great Law" and the GENIUS Act form a sophisticated policy combination. The latter serves as a regulatory framework that mandates stablecoins to become the "buyers" of U.S. Treasury bonds; the former provides issuance incentives, creating a complete closed loop.

The core design of the bill is filled with political wisdom: when users purchase stablecoins with 1 dollar, the issuer must use that 1 dollar to buy U.S. Treasury bonds. This meets compliance requirements while achieving fiscal financing goals. A large stablecoin issuer made a net purchase of 33.1 billion dollars of U.S. Treasury bonds in 2024, becoming the seventh largest buyer of U.S. Treasuries globally.

The tiered regulatory system further reveals the intention to support oligopolies: stablecoins with a market value of over $10 billion are directly regulated by the federal government, while smaller players are left to state-level agencies. This design accelerates market concentration, with the two major stablecoins currently accounting for over 70% of the market share.

The bill also includes exclusivity clauses: prohibiting non-U.S. dollar stablecoins from circulating in the United States unless they are subject to equivalent regulation. This both consolidates the hegemony of the dollar and clears the way for certain emerging stablecoins.

Debt Transfer Chain, the Rescue Mission of Stablecoins

In the second half of 2025, the U.S. Treasury bond market will see a supply increase of $1 trillion. In the face of this surge, stablecoin issuers are expected to play a crucial role. A bank's interest rate strategy director pointed out: "If the Treasury shifts to short-term debt financing, the demand increase brought by stablecoins will provide the Treasury Secretary with policy space."

The mechanism design is exquisite:

• For every 1 dollar stablecoin issued, 1 dollar of short-term U.S. Treasury bonds must be purchased, directly creating a financing channel.

• The growing demand for stablecoins translates into institutional purchasing power, reducing uncertainty in government financing.

• Issuers are forced to continue increasing their reserve assets, creating a self-reinforcing demand loop.

The portfolio manager of a fintech company revealed that several top international banks are in discussions about stablecoin cooperation, inquiring "how to launch a stablecoin solution within eight weeks." The industry's heat has reached its peak.

But the devil is in the details: stablecoins primarily anchor to short-term U.S. Treasuries, providing no substantial help to the supply-demand contradiction of long-term U.S. Treasuries. Moreover, the current scale of stablecoins is still negligible compared to U.S. Treasury interest payments—global stablecoin total scale is $232 billion, while annual interest on U.S. Treasuries exceeds $1 trillion.

The New Dollar Hegemony, the Rise of On-Chain Colonialism

The underlying strategy of the bill is the digital upgrade of dollar hegemony. 95% of global stablecoins are pegged to the dollar, creating a "shadow dollar network" outside of the traditional banking system.

Small and medium-sized enterprises in Southeast Asia, Africa, and other regions conduct cross-border remittances using USD stablecoins, bypassing the SWIFT system, reducing transaction costs by over 70%. This "informal dollarization" accelerates the penetration of the dollar in emerging markets.

The more profound impact lies in the paradigm revolution of the international clearing system:

• Traditional dollar settlement relies on interbank networks like SWIFT

• Stablecoins are embedded in various distributed payment systems in the form of "on-chain dollars".

• The dollar settlement capability breaks through the boundaries of traditional financial institutions, achieving an upgrade in "digital hegemony".

The EU has clearly recognized the threat. Its MiCA regulations restrict the daily payment functionality of non-euro stablecoins and impose a ban on the issuance of large-scale stablecoins. The European Central Bank is accelerating the development of the digital euro, but progress is slow.

Hong Kong adopts a differentiated strategy: while establishing a stablecoin licensing system, it plans to launch a dual licensing system for over-the-counter trading and custody services. The Monetary Authority also plans to release guidelines for the tokenization of real-world assets (RWA) to promote the on-chain of traditional assets such as bonds and real estate.

Risk Transmission Network, Countdown of the Time Bomb

The bill buries three structural risks:

First layer: US debt - stablecoin death spiral. If users collectively redeem stablecoins, issuers must sell US debt for cash → US debt prices plummet → other stablecoin reserves depreciate → total collapse. In 2022, a certain stablecoin briefly lost its peg due to market panic, and similar events in the future may impact the US debt market due to scale expansion.

Layer Two: The amplification of risks in decentralized finance. After stablecoins flow into the DeFi ecosystem, they are leveraged through liquidity mining, lending, and staking operations. The restaking mechanism causes assets to be repeatedly staked across different protocols, resulting in a geometric increase in risk. Once the value of the underlying assets plummets, it may trigger a chain liquidation.

Third layer: Loss of independence in monetary policy. The report directly points out that the bill will "pressure the Federal Reserve to lower interest rates." The government indirectly obtains "printing rights" through stablecoins, which may undermine the independence of the Federal Reserve - Powell has recently rejected political pressure, suggesting that a rate cut in July is unlikely.

More troubling is that the U.S. debt-to-GDP ratio has exceeded 100%, and the credit risk of U.S. debt itself is rising. If U.S. debt yields continue to be inverted or default expectations arise, the safe-haven attribute of stablecoins will be in jeopardy.

A New Global Chess Game: On-Chain Reconstruction of Economic Order

In response to the actions of the United States, the world is forming three major camps:

• Regulatory Integration Camp: Canadian banking regulators have announced that they are ready to regulate stablecoins, with a framework being developed. This echoes the regulatory trends in the United States, creating a coordinated situation in North America. A trading platform will launch American-style perpetual contracts in July, settling funding rates using stablecoins.

• Innovative Defense Camp: Hong Kong and Singapore exhibit divergent regulatory paths. Hong Kong adopts a prudent tightening approach, positioning stablecoins as "virtual bank substitutes"; Singapore, on the other hand, implements a "stablecoin sandbox" allowing experimental issuance. This difference may trigger regulatory arbitrage, weakening the overall competitiveness of Asia.

• Alternative solution camp: Citizens of high-inflation countries use stablecoins as "safe-haven assets," undermining the circulation of local currency and the effectiveness of central bank monetary policy. These countries may accelerate the development of local stablecoins or multilateral digital currency bridge projects, but face severe trade challenges.

And the international system will also undergo changes: from unipolar to "hybrid architecture", the current reform plan presents three paths:

• Diversified Currency Alliance (highest probability): The US dollar, euro, and renminbi form a tripolar reserve currency, supplemented by a regional settlement system (such as ASEAN multilateral currency swap).

• Digital Currency Competition: 130 countries are developing Central Bank Digital Currencies (CBDC), and the digital yuan has piloted cross-border trade, which may reshape payment efficiency but faces the challenge of sovereignty transfer.

• Extreme Fragmentation: If geopolitical conflicts escalate, it may lead to a divided dollar, euro, and BRICS currency camp, causing a surge in global trade costs.

The CEO of a certain payment platform pointed out a key bottleneck: "From a consumer perspective, there is currently no real incentive to drive the adoption of stablecoins." The company is launching a reward mechanism to tackle the adoption challenge, while some decentralized exchanges are solving trust issues through smart contracts.

The report predicts that with the implementation of the "Beautiful Big Act", the Federal Reserve will be forced to cut interest rates, leading to a significant weakening of the US dollar. By 2030, when stablecoins hold $1.2 trillion in US Treasuries, the global financial system may have quietly completed its on-chain reconstruction—dollar hegemony embedded in every transaction on the blockchain in the form of code, while risks spread to every participant through decentralized networks.

Technological innovation has never been a neutral tool. When the US dollar dons the cloak of blockchain, the game of the old order is being played out on a new battlefield!