Stablecoin Regulation Could Explode Treasury Demand by Over $1 Trillion, Citigroup Predicts

Issuers Could Become Top U.S. Treasury Holders by 2030

Hang onto your hats, crypto fans! Citigroup just dropped a bombshell report saying that if the U.S. gets its act together with stablecoin regulation, we could see a mind-blowing $1 trillion surge in demand for U.S. Treasuries. And get this - stablecoin issuers might just become the biggest holders of U.S. government debt by 2030!

According to the New York banking giant, a solid U.S. regulatory framework could supercharge stablecoin growth, driving up demand for "dollar risk-free assets" both at home and abroad. We're talking serious cash here, folks.

"Creating a U.S. regulatory framework for stablecoin would support demand for dollar risk-free assets inside and outside the U.S. The stablecoin issuers will have to buy U.S. Treasuries, or comparable low risk assets, against each stablecoin as a measure of having safe underlying collateral."

Citigroup

Citigroup's base case scenario is wild - they're saying stablecoin issuers "could hold more U.S. Treasuries by 2030 than any single jurisdiction today." If that pans out, these issuers "could become one of the largest holders of U.S. Treasuries relative to any other jurisdiction today." Can you believe it?

Risks and Challenges Lurk in the Shadows

But hold up, it's not all sunshine and rainbows. Citigroup's analysts are waving some red flags too. They're warning that stablecoins "carry run-risk," and if a major issuer goes belly-up, it "could cause contagion effect." Yikes! They also pointed out that stablecoins de-pegged a staggering "about 1,900 times in 2023, with around 600 of these being large-cap stablecoins."

And there's more - geopolitical risks might put the brakes on global stablecoin adoption. Citigroup is cautioning that stablecoins "may be viewed by many non-U.S. policy makers as an instrument of dollar hegemony." They're saying "policymakers in China and Europe will be keen to promote central bank digital currencies or stablecoins issued in their own currency." It's a wild world out there, folks!