Stablecoins could replace Fed liquidity in bond markets, Arthur Hayes says
Hayes: Stablecoins may fund debt, boost Bitcoin
In a detailed analysis published on July 3, former BitMEX CEO Arthur Hayes warned that the U.S. Treasury faces mounting challenges in its efforts to finance the national debt.
According to Hayes, Treasury Secretary Scott Bessent must sell over $5 trillion in bonds this year to cover deficits and maturing debt, all while maintaining stability in bond markets and keeping 10-year Treasury yields below 5%.
With the Federal Reserve constrained by inflation pressures and unable to resume large-scale bond purchases, Hayes argues that stablecoins could emerge as a critical source of liquidity. Specifically, he sees the transformation of bank deposits into tokenized stablecoins as a new mechanism for funding Treasury issuance without sparking a spike in interest rates.
Tokenized Deposits as “Stealth QE”
Hayes points to innovations such as JP Morgan’s JPMD token, which will operate on Coinbase’s Base network, as a key shift in banking infrastructure. By automating compliance and operations, banks could save up to $20 billion annually, while turning tokenized deposits into demand for Treasury bills (T-bills) — low-risk assets with attractive yields.
He estimates that tokenized banking could unlock as much as $6.8 trillion in T-bill demand. Moreover, a Republican-led proposal to end the Fed’s interest payments on excess reserves could push $3.3 trillion of idle capital back into Treasuries, amplifying the impact.
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Hayes calls this dynamic a form of "stealth quantitative easing"—not driven by Fed balance sheet expansion, but rather by private banks issuing stablecoins and using them to buy government debt, thereby boosting dollar supply and suppressing yields.
Implications for Bitcoin and the macro landscape
Hayes sees this evolving system as bullish for Bitcoin, noting that the leading cryptocurrency tends to thrive in environments with rising liquidity and declining real yields. While he acknowledges short-term risks—such as a potential liquidity pullback if the Treasury refills its cash balance too quickly—he remains optimistic.
In his view, stablecoins are evolving beyond payment tools to become integral components of macroeconomic strategy, linking the future of U.S. debt markets, banking, and digital assets.
We also wrote that JPMorgan predicts stablecoins market cap to hit $500 billion.
