Trump's Return: Stablecoins and Bitcoin, Which Can Solve the US Debt Problem?

Author: Hedy Bi , Jason Jiang | OKG Research

introduction

Trump's re-election has pushed the close interweaving of politics and economy to an unprecedented level. This " Trump phenomenon " is not only a reflection of his leadership style, but also symbolizes the comprehensive reshaping of economic interests and political power. In the context of economics, this complex structural transformation is called " political economy intertwining " . As the world's largest economy and the issuer of the reserve currency, every policy adjustment of the United States will be a weather vane for global capital flows. Looking ahead to 2025 , with the Trump administration's acceptance of the crypto field, the chain reaction of " Trump economics " will extend more quickly to the on-chain world, and the crypto market is rapidly leaping from marginal innovation to one of the important markets in global finance.

OKG Research has specially planned and launched a series of special topics on " Trump Economics " to deeply analyze the core logic of this process and future trends. The first article, "Trump Re-election: Bitcoin, Oil and Gold in the New Deal Economic Era", focuses on the impact of Bitcoin on the international financial landscape. This article starts with the traditional financial core asset of US Treasury bonds, and deeply analyzes the US Treasury bond market with a scale of up to US$ 36 trillion, and how to use blockchain technology and tools in the field of encryption to further consolidate and expand the dominant position of the US dollar in the global financial system.

Coinbase CEO Brian Armstrong said in an interview during the World Economic Forum in Davos, Switzerland that the upcoming US stablecoin bill may require issuers to fully back dollar-denominated stablecoins with US Treasury bonds. Although we believe that unless excess reserves are required, the possibility of requiring 100% US Treasury bonds is not high based on the role of cash reserves, Armstrong's expression still reflects the demand and favor of the crypto market for US Treasury bonds.

The growth rate of the U.S. debt market is astonishing: it took more than 200 years to grow from 0 to the first trillion U.S. dollars, but it took only 40 years to grow from 1 trillion U.S. dollars to 36 trillion U.S. dollars. The root cause of this astonishing change is that the Nixon administration abolished the gold standard in 1971, which led to the decoupling of the U.S. dollar from gold and ushered in an era of unlimited money printing, and the U.S. debt problem also got out of control.

As U.S. debt rapidly "expands", OKG Research observes that investors who have long been accustomed to " paying " for the 36 trillion U.S. debt market are gradually losing interest in investing, and the chain may be a new market for revitalizing U.S. debt in the future.

The US Treasury bond HARD mode starts in 25 years

In 2025, the U.S. Treasury market will enter the HARD mode, with nearly $3 trillion in Treasury bonds expected to mature, most of which are short-term. In 2024, the U.S. Treasury's net issuance has reached $26.7 trillion, a year-on-year surge of 28.5%.

Especially with Trump's return to the political stage, his stance of leaning towards loose monetary policy may increase market uncertainty. During his tenure, Trump repeatedly pressured the Federal Reserve to cut interest rates, viewing interest rate policy as a core tool to stimulate the economy and boost market confidence. If he succeeds in pushing for a rate cut, it may not only significantly lower U.S. Treasury yields and weaken the attractiveness of U.S. Treasury bonds to overseas investors, but may also increase pressure on the depreciation of the U.S. dollar, thereby impacting the global foreign exchange reserve allocation pattern. At the same time, Trump's policy orientation centered on economic growth may push the government to increase fiscal spending, further expand the fiscal deficit, and put pressure on the supply side of U.S. Treasury bonds.

However, on the demand side, especially for overseas central banks, the attractiveness of U.S. Treasuries seems to be decreasing. According to the latest statistics from OKG Research , the growth rate of overseas central banks' holdings of U.S. Treasuries is only 11% , which has not exceeded the growth rate of U.S. Treasuries issuance ( 28.5% ). Among the top 20 countries holding U.S. Treasuries, only France (35.5%), Singapore (31%), Norway (40%), and Mexico (33%) have increased their holdings of U.S. Treasuries faster than the issuance rate of U.S. Treasuries in 24 years.

Moreover, some overseas central banks are actively reducing their holdings of U.S. Treasuries. Since April 2022, China's holdings of U.S. Treasuries have remained below $1 trillion, and in September 2024, it further reduced its holdings by $2.6 billion to $772 billion. In the same month, Japan reduced its holdings by $5.9 billion to $1,123.3 billion. Although it is still the largest overseas creditor of U.S. Treasuries, its holdings have also fallen again. As the demand for diversification of foreign exchange reserves in various countries increases, the demand for U.S. Treasuries overseas has significantly weakened.

The rapid growth of debt and the continued weakening of overseas demand will pose a double challenge to the U.S. bond market , and the rise in risk premiums is almost inevitable. In the future, if the market fails to effectively absorb these debts, it may trigger larger-scale financial fluctuations.

The crypto markets may be offering innovative answers on how to efficiently absorb this debt.

Stablecoins may become one of the top 10 holders of U.S. debt in the world by 2025

As one of the safest assets in the world, U.S. Treasuries are playing an increasingly important role in the crypto market. Among them, stablecoins are the main carrier for U.S. Treasuries to penetrate the crypto market. Currently, more than 60% of on-chain activities are related to stablecoins, and most mainstream stablecoins choose U.S. Treasuries as their main collateral.

Take USDC and USDT, the two largest stablecoins in the world, as examples. Their issuance mechanism requires 1:1 collateralization of high-quality assets, among which US Treasuries occupy a major position. As of now, the scale of US Treasuries collateralized by USDC has reached more than 40 billion US dollars, while the scale of US Treasuries collateralized by USDT has exceeded 100.7 billion US dollars. The current scale of stablecoins alone has absorbed about 3% of the short-term US Treasuries that are about to mature. This proportion has surpassed Germany and Mexico, enough to rank 19th in the ranking of US Treasuries held by overseas central banks .

Although the Trump administration is expected to establish a strategic reserve of Bitcoin, attract international capital to flow into Bitcoin through government bets, drive the price of Bitcoin to continue to rise, and then make profits through market operations to reduce debt pressure. This method can theoretically contribute to specific fiscal plans or interest payments, but even if the price rises to $200,000 in the future and the total market value of Bitcoin exceeds $4 trillion, the United States will continue to purchase 1 million coins from now on, and the benefits it can bring are only about $100 billion.

Unlike Bitcoin, which indirectly converts debt into US debt, stablecoins such as USDT and USDC are creating direct demand for US debt. The market value of stablecoins exceeded US$210 billion on January 22, setting a new record high. Thanks to the acceleration of US legislation and the continued increase in the adoption of stablecoins around the world, OKG Research optimistically estimates that the market value of stablecoins will exceed US$ 400 billion in 2025 , and the resulting additional demand for US debt will exceed US$ 100 billion. Therefore, stablecoins may rank among the top 10 US debt holders in the world in 2025 .

If this development trend can be maintained, stablecoins will become the most important " invisible pillar " of the U.S. bond market , and the direct demand for U.S. bonds created by them will exceed the indirect returns that can be brought by investing in Bitcoin . Bitwise senior investment strategist once said on social media that the U.S. Treasury bond holdings of stablecoins may soon grow to 15%. A report previously released by the U.S. Treasury Department also pointed out that the continued growth of stablecoins will create structural demand for U.S. short-term Treasury bonds.

As Trump's policies to stimulate the economy are implemented, stablecoins and the small amount of dollars and most of the U.S. debts anchored behind them will also become a new type of dollar expansion. Since the U.S. dollar is the global reserve currency, overseas central banks and institutions generally hold U.S. debts. The act of issuing U.S. debts is actually using the credit of the United States to " export inflation " , indirectly making the world pay for its debts, thereby achieving an effect similar to " expanding the money supply " . This will not only consolidate the status of the U.S. dollar, but will also bring challenges to the supervision of other countries, especially taxation.

Large-scale tokenization brings global liquidity to U.S. Treasuries

In addition to being the preferred underlying asset for mainstream stablecoins, U.S. Treasuries are also one of the most popular asset classes in the current tokenization wave. According to RWA.xyz data, the tokenized U.S. Treasury market was worth $769 million at the beginning of 2024, and reached $3.4 billion at the beginning of 2025, a growth of more than 4 times. This rapid growth not only reflects the potential for on-chain financial innovation, but also highlights the market's recognition and demand for the tokenization of U.S. Treasuries.

Through tokenization, U.S. Treasury bonds are rapidly penetrating DeFi. Whether it is using U.S. Treasury bonds as risk-free income generating assets on the chain, or conducting derivative transactions through pledges, loans, etc., the DeFi ecosystem is becoming more and more "down-to-earth". These tokenized U.S. Treasury bonds not only bring more reliable underlying assets, but also capture stable returns from reality and distribute the returns directly to investors on the chain. The short-term U.S. Treasury bond fund (OUSG) previously launched by Ondo once had a return of 5.5%.

More importantly, the U.S. Treasury bonds will provide traditional investors with a more familiar asset class after being put on the blockchain, which will help attract continued inflows of institutional funds and further accelerate the maturity and institutionalization of the DeFi ecosystem. Projects using tokenized U.S. Treasury bonds can generally be regarded as " low-risk innovations " and will be easier to obtain regulatory approval.

For US Treasuries, tokenization provides a new tool to ease debt pressure. It not only allows US Treasuries to enter the on-chain world, realizes convenient cross-border transactions and cross-chain flows, and breaks the geographical restrictions of traditional financial markets; it also opens up a new buyer market for US Treasuries, further enhancing the global liquidity and attractiveness of US Treasuries. This new spread of on-chain liquidity may promote US Treasuries to become a core asset in the global financial market.

Since the market generally expects that the Fed's interest rate cuts may slow down in 2025 after Trump takes office, this has further pushed up the yield of short-term U.S. Treasury bonds, while reducing market risk appetite, making investors prefer more stable investment targets. In the foreseeable future, we will see a larger scale of U.S. Treasury bonds on the chain, and more projects based on tokenized U.S. Treasury bonds will emerge in the DeFi ecosystem and be favored by users and the market, gradually changing the way of wealth management and investment on the chain.