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Treasury secretary Scott Bessent is betting the crypto industry will become a crucial buyer of Treasuries in coming years as Washington seeks to shore up demand for a deluge of new US government debt.
Bessent has signalled to Wall Street that he expects stablecoins, digital tokens that are backed by high-quality securities such as Treasuries, to become an important source of demand for US government bonds, said people familiar with the discussions.
He has sought information from leading stablecoin issuers including Tether and Circle, and these discussions informed the Treasury department’s plans in the coming quarters to increase sales of short-term bills, these people said.
Bessent’s focus on stablecoins comes at a time when many investors are growing anxious about the country’s deteriorating public finances. Independent analysts expect Washington’s debt-to-GDP ratio to reach record highs over the next decade, with borrowing accelerating as a result of Donald Trump’s “big, beautiful” tax bill.
The Treasury department’s hopes that stablecoins will become a key source of demand for US government debt is also the latest sign of the White House’s drive to bring crypto to the heart of US finance.
Jay Barry, head of global rates strategy at JPMorgan Chase, one of the biggest dealers in the US bond market, said: “[Secretary Bessent and the Treasury department] absolutely think that stablecoins will be a real source of new demand for Treasuries. And that is absolutely why [Bessent] is comfortable weighting issuance towards [short-term debt].”
Bessent’s discussions came around Congress’s passage of the Genius Act in July, which establishes a regulatory framework for stablecoins. The act requires stablecoins to be backed by a select number of ultra-safe and ultra-liquid assets, including Treasury bills.
The Treasury department said: “The recent passage of the Genius Act is a significant development in which we are monitoring as it will promote innovation in stablecoins and grow demand for short-term Treasury securities.”
It added “issuance plans will continue to be informed by a variety of inputs including that from investors, primary dealers, and the Treasury borrowing advisory committee”.
Circle and Tether declined to comment.
Stablecoins are a vital link between traditional and digital assets, and generally seek to trade consistently at $1. Issuers are able to maintain this peg by holding portfolios of high-quality, short-term debt.
The stablecoin market is worth about $250bn, according to research from the Federal Reserve Bank of Kansas City — tiny compared to the $29tn US Treasury market. But Bessent has previously told Congress he expects the market to grow to $2tn in the coming years.
Bessent’s stablecoin initiative has come as the former hedge fund manager has sought to leverage his contacts on Wall Street to gather intelligence on the Treasury market.
Bessent and his team have become known for directly and frequently engaging with banks, hedge funds and asset managers about market conditions, said four investors who have received these calls.
Conversations between the financial industry and the Treasury department are commonplace, but the volume of the outreach has increased since January. Treasury officials have also expressed more concern about demand for US debt than normal in those calls, said two of the people briefed on the matter.
The Treasury department said “regular and predictable debt issuance means that Treasury must be cognisant of structural market developments, which Treasury continues to monitor closely”.
Additional reporting by Josh Franklin in New York