Stablecoin Growth Tied to Surging Treasury Demand and Dollar Dominance, Citi Finds

The rising adoption of stablecoins is contributing to stronger demand for short-term U.S. Treasuries, according to a new report from Citigroup. The bank argues that stablecoins are no longer just a crypto-native tool but a growing force in global financial markets.

Citi analysts noted that as stablecoins expand in scale, issuers increasingly allocate reserves to short-dated U.S. government debt. However, the overall market impact may be partially offset by reallocation from traditional money market funds.

Pending U.S. legislation could amplify this trend. Congressional proposals would require stablecoin issuers to back their tokens with highly liquid assets such as Treasury bills, further linking crypto infrastructure to public debt markets.

While some critics argue that stablecoins strengthen the dollar’s global grip, Citi’s report clarifies the inverse: the dollar’s preeminence is the reason for its dominance in stablecoin issuance, not a consequence of it.

Tokens like USDT continue to lead the market due to their utility in digital trading and settlements. Citi also highlighted growing interest from legacy financial giants such as Visa and PayPal, which are piloting stablecoin integrations into their payment ecosystems.

With projections placing the potential stablecoin market at $1.6 trillion to $3.7 trillion by 2030, the report acknowledged that regulatory factors—particularly limitations on yield generation—may curb broader adoption.

Nevertheless, Citi emphasized that stablecoin growth offers a lens into evolving monetary dynamics, as digital dollars play a more prominent role in shaping cross-border capital flows and payment rails.