Stablecoin issuers have absorbed more than 40% of the decline in Chinese holdings of US Treasuries since 2021, according to a Federal Reserve Bank of San Francisco Economic Letter dated September 28, 2026. The research positions the stablecoin sector — long treated as a speculative corner of crypto — as a substantial new buyer of US government debt.

The numbers are significant. Issuers collectively added approximately $200 billion in Treasury holdings between 2021 and mid-2026, a period during which China was steadily reducing its position in US government debt. The stablecoin sector's purchases covered more than 40% of that Chinese retreat, according to the letter.

The growth trajectory is steep. Stablecoin issuers' Treasury holdings expanded more than tenfold within five years, the research found. Since 2023, their purchases of short-term Treasury bills have also surpassed those of Japan — one of the largest foreign holders of US government debt.

The buying is concentrated. The San Francisco Fed notes that the two largest stablecoins account for most of the activity, and both favor short-term Treasury instruments. That preference follows the mechanics of the product: a stablecoin promises redemption at a fixed value, usually one dollar, and short-dated government debt is the closest thing to cash in the investable universe.

The 2030 projection

The letter projects that stablecoin issuer demand for short-term Treasuries could reach approximately $400 billion by the end of 2030. The Fed frames that figure conditionally — it assumes current trends persist and represents a possibility rather than a forecast of certainty.

Hougan's read from the advisor circuit

Bitwise CIO Matt Hougan expects stablecoins to grow significantly, and he is basing that view on direct conversations with allocators. Hougan said he has spoken with more than 40 financial advisors who collectively manage assets exceeding $175 trillion.

His takeaway: those advisors showed more interest in stablecoins and tokenization than in Bitcoin as a speculative investment. Real-world use cases, not price charts, dominated the discussions.

According to Hougan, the stablecoin narrative is gaining institutional traction and reshaping how institutions think about capital markets and payments infrastructure.

Tokenization — representing traditional assets like bonds or funds as blockchain-based tokens — tends to travel with stablecoins. A tokenized asset needs a dollar-like instrument to trade against, and stablecoins fill that role.

Concentration and redemption risk

The Fed's findings carry operational implications. With two issuers accounting for most Treasury demand, a large share of that buying depends on a small number of companies — a concentration risk for both the stablecoin market and the short-end of the Treasury market itself.

The growing link also cuts both ways. If stablecoins become a significant buyer of short-term Treasuries, sudden redemption events could force issuers to sell those holdings quickly, potentially amplifying stress in a market long valued for its liquidity.

Still, the aggregate picture is clear. Stablecoin issuers have grown their Treasury holdings more than tenfold in five years, outpaced Japan in short-term bill buying since 2023, and covered more than 40% of China's retreat. Whether the Fed's $400 billion projection holds will depend on regulatory design choices, issuer concentration, and redemption behavior through the remainder of the decade.