Stablecoin Issuers Now 18th Largest Holder of U.S. Treasuries, Says Bernstein

Stablecoin issuers as a category have grown to become the 18th largest holder of U.S. Treasuries, a milestone that places them alongside major sovereign holders.

According to a new report by Bernstein, the total circulation of stablecoins has reached an all-time high of $170 billion, following a dip in 2023. The report describes the dollar-pegged coins as "systemically important" and notes their role in providing USD savings access to international users, helping to spread digital dollars beyond the U.S.

Amid this growth, competition in the stablecoin and digital asset market continues to heat up, ascrypto custodian BitGo on Wednesday announced its U.S. dollar-pegged stablecoin, USDS, set to launch in January 2025. This follows Coinbase’s introduction of cbBTC, a Bitcoin-pegged asset for its Base layer-2 network.

Coinbase’s move came after BitGo partnered with BiT Global to expand custody operations for Wrapped Bitcoin (WBTC), a collaboration that has drawn attention due to the involvement of Tron founder Justin Sun.

The Bernstein report also pointed to a significant shift in how stablecoins are being used. While they have traditionally served as a bridge for crypto trading, dollar-pegged coins are now being held for non-crypto purposes, such as cross-border payments and savings.

“Stablecoin usage has decoupled from crypto and is increasingly being held for non-crypto use cases,” Bernstein stated​.

The data backs this up, with monthly active wallets holding stablecoins reaching a record 22 million, despite fluctuations in trading volume. "Stablecoins are seeing increasing integration with payments and fintech platforms," the report added, citing examples like PayPal’s USD stablecoin and USDC’s integration with major platforms.

Tether (USDT) remains the dominant stablecoin with $120 billion in circulation, followed by Circle’s (USDC) at $35 billion. Tether’s widespread use in cross-border payments and its integration with offshore exchanges were key drivers of its growth. "Tether’s integration with global offshore exchanges and its cross-border payments usage in non-U.S. markets continues to be the key driver," Bernstein stated.

New entrants are also shaping the landscape, with PayPal’s PYUSD stablecoin nearing $1 billion in circulation." The businesses behind dollar-pegged coins remain highly profitable with float income from U.S. treasury retained by issuers," Bernstein explained, pointing to the profitability of companies like Tether and Circle​.

Edited by Stacy Elliott.