Article by Xiao Bing, Shenchao TechFlow
On October 27, U.S. Secretary of the Treasury Scott Bessent appeared at The Shed in Manhattan, New York, in a panel discussion with Ripple CEO Brad Garlinghouse.
The venue is Ripple’s annual Swell conference, but the topics extend far beyond the scope of a single company’s business.
Bessenet framed cryptocurrency on stage as part of a grand narrative: it is a critical battleground in the U.S.-China tech competition, alongside AI and semiconductors; dollar-stablecoins are not speculative tools, but technological infrastructure designed to preserve the U.S. dollar’s status as the global reserve currency; and stablecoin issuers are emerging as a significant new source of demand for U.S. Treasury bonds.
What did Bessent say?
The core argument can be condensed into three sentences:
The power base of reserve currencies is shifting from military to technological dominance.
Bessen pointed out in the dialogue that historically, the global status of major powers' currencies was supported by military strength, but this logic is changing—technological leadership is replacing military power as the foundation for reserve currency status. Crypto, AI, and semiconductors together form the technological backbone of the United States in this competition.
Stablecoins serve as a channel for the U.S. dollar to penetrate emerging markets worldwide.
Currently, over 90% of stablecoins are pegged to the U.S. dollar. Bessent believes that for emerging market countries with unstable local currencies and high inflation, USD stablecoins provide a pathway to access the dollar outside the traditional banking system, thereby expanding the dollar’s real-world usage globally.
Three: Stablecoins will become an important source of financing for the U.S. Department of the Treasury.
Under the GENIUS Act (the enacted federal stablecoin regulatory framework), payment stablecoin issuers must hold cash, qualified U.S. Treasury securities, or other permitted liquid reserve assets at a ratio of at least 1:1.
The logic is straightforward: for every stablecoin minted, there is a corresponding demand to purchase U.S. Treasury bonds. The larger the stablecoin market, the greater the number of buyers for U.S. Treasuries.
Bessent even compared the GENIUS Act to Lincoln’s 1863 National Currency Act, viewing both as institutional changes of equal historical significance.
He also expressed regret that the CLARITY Act (comprehensive legislation on cryptocurrency market structure) failed to pass Congress, with the Senate voting 49 to 50 against it on September 15—11 votes short of the 60-vote threshold. However, Bessent stated that the Treasury Department has “significant authority” to work with the SEC and CFTC to advance a regulatory framework for crypto industry compliance and prevent crypto firms from being “debanked” by the banking system.
Stablecoins + Treasury Bonds: A Major Transaction Underway
Bessen's assessment that stablecoins serve as a source of treasury financing is not unfounded.
There is a clear data chain behind it:
The total market capitalization of stablecoins currently stands at approximately $300 billion, with Tether (USDT) and Circle (USDC) together accounting for about 90%. The two issuers hold U.S. Treasury securities and related assets valued at approximately $170 billion to $220 billion.
Throughout 2024, stablecoin issuers purchased approximately $40 billion in short-term Treasury bills, reaching a scale comparable to that of sovereign buyers such as Japan and Singapore.
Under the GENIUS Act, reserves for compliant stablecoins must be invested in U.S. Treasury bills with maturities of 93 days or less. This perfectly complements another strategic move by Bessent, who announced in August that he would double the size of long-term Treasury buybacks, financing them through the issuance of additional short-term Treasury bills—known as a "Treasury Twist."
The newly created demand for stablecoins has precisely landed on short-term Treasury bonds.
Standard Chartered Bank predicts that the stablecoin market will reach $2 trillion by 2028, corresponding to approximately $1 trillion in additional short-term Treasury demand. Bessent himself also stated during a Senate hearing that the market could exceed this projection.
A research paper published by the IMF in March 2026 found that demand shocks for stablecoins have begun to exert a measurable impact on government bond yields, with each 1% market cap growth shock leading to approximately a 0.5 basis point compression in yields.
From the perspective of the U.S. Department of the Treasury, this is a rare "positive-sum game": the expansion of stablecoins → increased real-world global usage of the U.S. dollar → higher demand for short-term Treasuries → lower government borrowing costs → strengthened status of the dollar as a reserve currency.
And all of this requires neither Fed rate cuts nor foreign central banks increasing their holdings—only让更多 people around the world use USD stablecoins.
The other side of the coin
But what Bensent did not say on stage is equally important.
Demand for Treasuries by stablecoins is "price-inelastic"—issuers must hold reserves regardless of yield levels. This is an advantage during calm markets (providing stable demand), but can become a risk during market turmoil. If stablecoins face a large-scale redemption wave, issuers may be forced to sell large amounts of short-term Treasuries in a short time, potentially exacerbating market volatility. The Bank of England has already issued warnings about this.
The failure of the CLARITY Act also leaves a practical question unanswered: while stablecoins now have a federal framework (the GENIUS Act), broader structural issues in the crypto market—such as who regulates exchanges, how tokenized securities should be classified, and where the compliance boundaries lie for DeFi protocols—still lack legislative clarity.
Bessenet said it could be compensated for by regulatory actions from the SEC and CFTC, but JPMorgan noted that administrative rules lack the permanence of legislation and can be easily overturned by the next administration.
This means that Bessent’s vision for cryptocurrency has a window of opportunity—if regulatory actions are not codified into law during this administration, the stability of these rules is compromised.
But there is no doubt that the United States is building a digital financial system centered around U.S. dollar-backed stablecoins.
The GENIUS Act provides a legislative framework, the OCC issues bank charters, the Treasury defines a strategic role, and the SEC and CFTC establish regulatory guardrails. Ripple obtaining a bank charter, Tether and Circle holding hundreds of billions in U.S. Treasuries, and Robinhood issuing tokenized stocks on-chain—these seemingly disparate events are converging into the same current.
Regarding the direction of this river, Bensent summed it up in one sentence: “The United States will prevail in the digital assets sector and, as a result, have a stronger dollar.”