Analysis: Stablecoins May Become a New Tool for U.S. Treasury Secretary Yellen to Address the Deficit

After the GENIUS Act was passed in the U.S. Senate this week, stablecoins could potentially become an important funding source for the U.S. government, and may even serve as a new tool for Treasury Secretary Bessent to address the country's deficit. Bessent previously praised the GENIUS Act and stated that a regulated and growing stablecoin market could create new buyers for U.S. government debt, boosting private sector demand for U.S. Treasuries. In May, Bessent told the U.S. House Financial Services Committee that there is speculation the stablecoin market could generate demand for as much as $2 trillion in U.S. government securities in the coming years.
However, analysts believe the stablecoin industry is unlikely to fully resolve the U.S. government's debt financing challenges and may introduce additional risks, as the extra demand for stablecoins will take time to develop, while the Treasury needs to issue a large volume of debt securities within a year. If problems arise that prevent the Federal Reserve from cutting interest rates, the U.S. deficit could spiral out of control. (CNBC)