Imagine this: the U.S. Treasury, faced with ballooning debt and tougher borrowing conditions, turns to a solution born in the world of crypto—stablecoins. Sound far-fetched? Maybe. But according to Thomas Wash1 at Confluence Investment Management, it’s not only possible—it’s already being considered.
“Increasing national debt and tightening financing conditions are pushing the US Treasury to rethink traditional funding strategies,” Wash explains. “And stablecoins have emerged as an unexpected contender.”
That’s not speculation. April’s Treasury Quarterly Refunding meeting revealed officials are “actively evaluating the use of stablecoins for buying US debt.” In Wash’s view, this could mark “a strategic shift in government financing, blending innovation with necessity as the US recalibrates its fiscal approach in a changing global landscape.”
So, What Exactly Is a Stablecoin?
Wash breaks it down: stablecoins are digital currencies built to stay... well, stable. Most are tied to the U.S. dollar at a 1:1 ratio. You hand over dollars (or another asset), and the issuer mints that value in stablecoins. These are backed by reserves—typically things like Treasury bills, insured bank deposits, or short-term repurchase agreements. No fluff. No wild volatility.
Some used to back these coins with commercial paper, but that’s changing. The GENIUS Act, which just passed the House, would lock reserve assets into only the safest options. That’s a big deal.
This shift actually fits nicely with the Treasury’s own playbook. “Widespread adoption of stablecoins could spur new demand for short-duration bonds,” Wash says, noting that aligns with Treasury’s recent pivot toward short-term debt to fund government spending.
From $200 Billion to $2 Trillion?
Yep, you read that right. Stablecoins are currently a $200 billion market—and around 80% of that is already tied up in Treasury bills and repos. But with proper legislation in place, Wash believes that number could hit $2 trillion by 2028. That kind of demand would be a game changer for U.S. debt issuance.
Like Money Market Funds... Without the Interest
Wash compares stablecoins to money market funds, with one major catch: they don’t pay interest. Why? Because that would legally classify them as securities—opening a whole can of regulatory worms.
But this might not be a drawback. “The advent of stablecoins could force banks and money market funds to increase their yields,” Wash points out. So while they might not siphon away huge capital from traditional markets, they could push institutions to up their game.
Still, there’s concern that stablecoins could pull money away from places like money markets or traditional banks. On the flip side, their inability to offer interest might limit that effect.
Dollar Access, Without a Bank Account
Stablecoins are also a powerful tool for global access. “They offer individuals and entities worldwide exposure to the US dollar without requiring direct engagement with the traditional US banking system,” Wash writes.
In practice, that means cheaper, faster, and simpler cross-border payments—especially useful for people in places with shaky currencies or unstable financial systems. As Wash notes, this expands their “use as a store of value,” giving the dollar even more reach globally.
And because these tokens run on blockchain, the transactions are transparent, traceable, and verifiable—without needing a bank middleman.
But What Could Go Wrong?
Let’s not sugarcoat it: stablecoins come with risks.
Wash flags the biggest: “The potential for stablecoin runs.” In stressful times, some stablecoins have already “broken the buck,” triggering fears of a digital bank run.
If confidence wavers, things could spiral quickly—especially in a hyper-connected blockchain environment. That’s why Wash emphasizes the need for sound regulation and oversight. Without it, the promise of low-cost digital liquidity could become a systemic liability.
Final Thoughts: The Crypto-Treasury Crossover
Wash paints a compelling picture of where things might be heading. Stablecoins are no longer some speculative sideshow. They’re edging into the conversation at the highest levels of U.S. financial policy.
If regulatory clarity arrives—and investor confidence holds—these digital tokens could become the backbone of a new, modernized Treasury funding model.
So whether you’re a crypto enthusiast or a cautious observer, one thing is clear: stablecoins aren’t just about the future of fintech. They might just shape the future of public finance.
Footnote:
1 Wash, Thomas. Confluence Investment Management. "Asset Allocation Bi-Weekly - Stablecoin: Treasury's Next Big Bet? (July 21, 2025) - Confluence Investment Management." Confluence Investment Management, 21 July 2025. ↩︎
