The sovereign debt dilemma cannot be alleviated by stablecoins; experts reveal the gap between policy expectations and market reality

Stablecoins were once highly anticipated, with Treasury Secretary Scott Bessett even believing they could boost demand for U.S. Treasury bonds and ease the government’s increasing debt repayment costs. However, Princeton University senior researcher Bill Dudley pointed out that these expectations are far from realistic.

The Huge Gap Between Supply Expectations and Actual Demand

The rate at which stablecoin issuers purchase government bonds has fallen far short of policymakers’ expectations. The fundamental reason is that the GENIUS Act imposes strict restrictions on stablecoins—prohibiting interest payments on stablecoins. This means that users holding stablecoins lack incentives to hold them long-term and are more inclined to quickly circulate funds, creating a pattern of short-term speculation rather than long-term savings.

High Turnover Rates Weaken Stability

The high turnover characteristic of stablecoins should be an advantage, but in the context of debt financing, it becomes a bottleneck. Governments may impose restrictions on cross-border use of stablecoins, further diminishing their role as purchasers of government bonds. These external constraints, combined with the internal interest-free design, make the actual contribution of stablecoins to reducing U.S. debt service costs far below initial optimistic estimates.

Contradiction Between Policy Intentions and Market Reality

Ultimately, the Treasury initially hoped that stablecoins could serve as a stable source of demand for government bonds. However, the actual stablecoin ecosystem presents a completely opposite picture—prioritizing liquidity, lacking yield, and facing increased regulatory constraints. This further highlights that policymakers’ optimistic assumptions about emerging financial tools often need to be contrasted with the real behaviors of market participants.