JPMorgan: Stablecoins Unlikely to Significantly Boost U.S. Treasury Demand; $2–4 Trillion Target May Be Too Aggressive

JPMorgan’s latest analysis indicates that although the US stablecoin market is rapidly expanding under the momentum of the GENIUS Act, the grand expectation that it will “boost demand for US short-term Treasuries” may fall far short of policymakers’ projections. Since the act was passed in July, the total supply of stablecoins has grown by over $50 billion, surpassing $300 billion in scale, but it is still far from the White House’s previous target of reaching $2–4 trillion by 2028–2030.

JPMorgan’s Head of US Short-Term Strategy, Teresa Ho, noted that the growth momentum of stablecoins is strong, but it is “unrealistic” for the market to expand to several trillion dollars within a few years. The bank expects the stablecoin market could grow to around $700 billion in the coming years, mainly limited by current laws prohibiting the issuance of interest-bearing stablecoins—a restriction that weakens the core driver of demand growth.

Stablecoins Have Limited Impact on US Treasury Demand

The prevailing view in the market is that wider adoption of stablecoins as payment tools will drive demand for US short-term Treasuries, since mainstream dollar stablecoins are mostly backed by Treasuries as reserve assets. Currently, Tether and Circle together hold about $155 billion in US Treasuries, accounting for 2.5% of the total market—significantly less than the 6.8% held by foreign governments, and far behind the 33% share held by money market funds.

Analysis shows that even if the stablecoin industry increases its holdings of Treasuries by an additional $50–55 billion by the end of 2025, the scale would still be insufficient to ease the pressure from the US’s enormous fiscal deficit. Even if the market grows to $2 trillion in the future, stablecoin issuers would only be “marginal buyers,” making it difficult to change the overall demand structure for Treasuries.

Regulatory, Geopolitical, and Emerging Market Constraints Pose Challenges

While Tether has become the 17th largest holder of US Treasuries (with $127 billion in holdings) and has launched a compliant domestic stablecoin, USAT, significant global regulatory uncertainty remains. Countries such as China have begun restricting dollar-denominated stablecoins (USDT, USDC) to maintain financial system stability.

Standard Chartered estimates that by 2028, up to $1 trillion from emerging markets could flow into stablecoins, which may prompt more countries to impose restrictions, thereby posing risks to the stablecoin expansion path.

Overall, JPMorgan believes that while stablecoins will continue to grow, their role in boosting demand for US Treasuries is limited and unlikely to fundamentally solve the problem of the US’s ever-expanding fiscal deficit.