U.S. Treasury Secretary supports Crypto: Stablecoins are a new weapon for U.S. dollar hegemony and a new buyer of U.S. debt

**Author:** Xiao Bing, Deep Tide TechFlow

On October 27, U.S. Treasury Secretary Scott Benset appeared at The Shed in Manhattan, New York, for a discussion with Ripple CEO Brad Garlinghouse.

The venue was Ripple's annual Swell conference, but the topics extended far beyond the business scope of a single company.

Benset framed cryptocurrency within a grand narrative: like AI and semiconductors, it is a key battleground in the U.S.-China tech competition; dollar stablecoins are not speculative tools but the technological infrastructure that maintains the dollar's status as the global reserve currency; and stablecoin issuers are becoming an important new buying force for U.S. Treasury bonds.

### What Did Benset Say?

The core arguments can be summarized in three sentences:

1. The power base of reserve currency is shifting from military to technology.

Benset pointed out during the discussion that historically, the global status of major currencies was supported by military power, but this logic is changing, with technological leadership replacing military strength as the cornerstone of reserve currency status. Crypto, AI, and semiconductors together form the technological foundation for the U.S. in this competition.

2. Stablecoins are the channel for the dollar's penetration into global emerging markets.

Currently, over 90% of stablecoins are denominated in dollars. Benset believes that for emerging market countries with unstable local currencies and high inflation, dollar stablecoins provide a way to access dollars outside the traditional banking system, which will expand the actual use of dollars globally.

3. Stablecoins will become an important source of financing for the U.S. Treasury.

According to the GENIUS Act (the passed federal stablecoin regulatory framework), payment stablecoin issuers must hold cash, qualified U.S. Treasury bonds, or other permissible liquid reserve assets at a ratio of at least 1:1.

The logic is straightforward: for every stablecoin minted, there is a corresponding demand for purchasing U.S. Treasury bonds. The larger the stablecoin market, the more buyers there are for U.S. debt.

Benset even compared the GENIUS Act to the National Currency Act signed by Lincoln in 1863, suggesting that both represent institutional changes of the same historical significance.

He also expressed regret over the failure of the CLARITY Act (broader cryptocurrency market structure legislation) to pass Congress, which was voted down by the Senate on September 15 with a 49-50 vote, falling 11 votes short of the 60-vote threshold. However, Benset stated that the Treasury has "significant power" to collaborate with the SEC and CFTC to advance a compliance framework for the crypto industry through regulatory actions and to prevent crypto firms from being "debanked" by the banking system.

### Stablecoins + Treasury Bonds: A Major Transaction in Progress

Benset's assessment of stablecoins as a "source of financing for the Treasury" is not unfounded.

There is a clear chain of data behind it:

The current total market value of stablecoins is approximately $300 billion, with Tether (USDT) and Circle (USDC) accounting for about 90% of that, and the two issuers holding approximately $170-220 billion in U.S. Treasury bonds and related assets.

In 2024, stablecoin issuers purchased about $40 billion in short-term Treasury bills, a scale comparable to that of sovereign buyers like Japan and Singapore.

According to the GENIUS Act, compliant stablecoin reserves must be directed towards short-term Treasury bonds with maturities of 93 days or less. This aligns perfectly with another strategic move by Benset. In August, he announced a doubling of the long-term Treasury bond repurchase scale, raising funds by issuing more short-term Treasury bills, a move referred to as the "Treasury Twist."

The new demand created by stablecoins precisely targets short-term Treasury bonds.

Standard Chartered Bank predicts that the stablecoin market will reach $2 trillion by 2028, corresponding to about $1 trillion in new short-term Treasury bond demand. Benset himself indicated during the Senate hearing that the market is expected to exceed this forecast.

A research paper published by the IMF in March 2026 found that the demand shock for stablecoins has already begun to have measurable effects on Treasury yields, with each 1% increase in market value resulting in approximately 0.5 basis points of yield compression.

From the perspective of the U.S. Treasury, this represents a rare "positive-sum game": expansion of stablecoins → increased actual use of the dollar globally → rising demand for short-term Treasury bonds → lower government financing costs → strengthened status of the dollar as a reserve currency.

And all of this does not require the Federal Reserve to cut interest rates or foreign central banks to increase their holdings; it simply requires more people around the world to use dollar stablecoins.

### The Other Side of the Coin

However, what Benset did not mention on stage is equally important.

The demand for Treasury bonds from stablecoins is "price insensitive"; regardless of yield levels, issuers must hold reserves. This is an advantage in stable markets (a stable source of demand), but it can become a risk during market turmoil. If stablecoins face a large-scale redemption wave, issuers may be forced to sell large amounts of short-term Treasury bonds in a short time, potentially exacerbating market volatility. The Bank of England has already issued warnings about this.

The failure of the CLARITY Act also leaves a practical issue: stablecoins now have a federal framework (the GENIUS Act), but for the broader cryptocurrency market structure, who will regulate exchanges, how to classify tokenized securities, and where the compliance boundaries for DeFi protocols lie... there are still no legislative answers.

Benset suggested that this could be compensated through regulatory actions by the SEC and CFTC, but JPMorgan pointed out that administrative rules lack the permanence of legislation and can be easily overturned by the next administration.

This means that the grand vision for crypto that Benset outlined has a time window; if regulatory actions cannot be solidified into law during this administration, the stability of these rules will be compromised.

But there is no doubt that the U.S. is building a digital financial order centered around dollar stablecoins.

The GENIUS Act provides a legislative framework, the OCC issues banking licenses, the Treasury defines strategic roles, and the SEC and CFTC establish regulatory guardrails. Ripple obtains a banking license, Tether and Circle hold hundreds of billions in U.S. debt, and Robinhood issues tokenized stocks on-chain; these seemingly disparate events are converging into the same river.

The direction of this river is summarized by Benset in one sentence: "The U.S. will win in the field of digital assets and thus have a stronger dollar."