Stablecoins and treasuries: Relationship that may become volatile

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Stablecoins from Tether and Circle: a hidden risk for treasuries

Why outflows hit harder than inflows

A study by the Bank for International Settlements (BIS) sheds light on how this link is already influencing the U.S. treasury market, the largest and most liquid in the world. The scale is impressive: $29 trillion in various debt instruments, from short-term bills to long-term bonds.

Even in calm times, movements in stablecoin funds can be seen in fluctuations in treasury yields. When investors massively redeem stablecoins, issuers are forced to sell part of their treasury holdings to return dollars to customers. Selling even a few billion dollars in bonds puts downward pressure on prices and pushes yields higher.

Most importantly — the impact of outflows is noticeably greater than the impact of inflows. In numbers, an investor exit from USDT or USDC increases the yield on 3-month treasuries two to three times more than an equivalent inflow lowers it. This asymmetry could be critical in a crisis.

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So imagine now a stress scenario. Widespread doubts about an issuer’s reliability, rumors, or regulatory pressure could turn routine redemptions into a flood. In such a situation, bond sales would surge to the point where yields could jump far more than a few basis points, becoming significant even for the huge treasury market.

Why this matters to everyone

The U.S. treasury market is the largest and most liquid in the world. It underpins the financing of the U.S. national debt, which exceeds $37 trillion, and its yields serve as a benchmark for dollar-denominated lending rates worldwide. When yields rise, loans for companies become more expensive, mortgage costs climb, and governments pay more for their borrowings.

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Thus, even a few extra basis points caused by sales from stablecoin issuers could be felt across the global economy. This is no longer an internal crypto-market matter — it’s a factor that could affect the financial lives of millions of people, even if they’ve never heard of USDT or USDC.

Politics and markets

There are also those who view the situation differently. Donald Trump, for example, recently stated that stablecoins strengthen the dollar and bolster U.S. national security. In a sense, he’s right: as long as demand for them grows, issuers buy treasuries, thereby supporting their market. But the BIS warns: in a crisis, this mechanism would reverse, and that support would vanish.

Stablecoins can no longer be seen as an isolated segment of the financial system. They have become one of the channels through which developments in the crypto industry can influence the world’s largest debt market. For now, this influence is moderate and manageable. But the question researchers are asking remains open: is the financial system prepared for the day when this channel might transmit not stability, but shock?

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