Stablecoin issuers hold $115 billion in T-bills as foreign buyers retreat

Foreign investors sold $72.5 billion of short-term Treasury bills over two months, and Washington is betting stablecoin issuers can fill the gap.

Foreign investors sold $29 billion of short-term U.S. Treasury bills in June, a second straight monthly reduction, as Washington pivots to stablecoin issuers holding $140 billion of that paper.

The Treasury International Capital report, the monthly record of cross-border money flows, shows foreign holdings of short-term Treasuries fell to about $1.4 trillion in June from $1.43 trillion in May, according to the data. The June sale followed $43.5 billion of bill liquidations in May, a two-month total of $72.5 billion.

The same month, foreign investors bought $181.4 billion of U.S. equities and sent a net $133.5 billion into U.S. markets, while adding just $6.8 billion of long-term Treasuries. Tether directly held $114.96 billion in Treasury bills at the end of the second quarter, plus $25.62 billion in short-term repo operations, according to its attestation. Circle manages most of its USDC backing through BlackRock's Circle Reserve Fund, a government money-market fund holding cash, short-dated Treasuries and overnight Treasury repo.

The mechanism is indirect but structural: each dollar token issued is backed by reserves parked in T-bills, turning demand for digital dollars into demand for U.S. government debt. The GENIUS Act, signed July 18, 2025, requires payment stablecoin issuers to hold liquid reserves, and the Treasury's Aug. 17 proposed rule formalizes that treatment, with a 60-day comment period ending in mid-October. The law takes effect Jan. 18, 2027.

Why the numbers don't yet add up

Tether reported $184.6 billion of USDT in circulation at the end of the second quarter, an increase of just $446 million from the prior quarter, according to its attestation. DefiLlama put the entire stablecoin market near $302 billion as of Aug. 21, down 0.14 percent over 30 days. Those figures rule out the claim that new token creation absorbed the $29 billion June bill sale, as issuers may have rearranged existing reserves rather than buying fresh paper.

The gap matters because the same mechanism can run backward. When users redeem stablecoins, issuers need cash and may sell bills or let them mature, creating their own selling pressure. USDT and USDC together account for more than 83 percent of the stablecoin market, with USDT at roughly $183 billion and USDC at about $72.3 billion, per DefiLlama.

What to watch next

The next TIC release, scheduled for Sept. 16, will cover July. A third month of foreign bill sales alongside flat token supply would leave the gap open, while higher stablecoin circulation and larger bill positions in issuer disclosures would show the new buyer becoming more active. Custody reporting may prevent a precise match between the two datasets.

For now, stablecoins are not filling the gap. The $302 billion sector is large enough to matter, but Tether's quarterly expansion was too small to explain June's sale. Washington is building rules for a buyer class that could become far more important at the exact maturity where foreign demand softened — the link between digital dollars and government financing is the main reason the $29 billion bill sale deserves attention.

This article is for informational purposes only and does not constitute investment advice.