Stablecoins Cannot Fund USA's Deficit

US TREASURY SECRETARY Scott Bessent is wrong about a potential big new source of demand for US government debt—again.

- PAUL J DAVIES Bloomberg

The treasury secretary expects stablecoins, the crypto tokens designed to keep a constant dollar value, to grow rapidly and gobble up huge volumes of public bonds. Both the explosion of issuance and the impact on treasuries are overblown.

It's the second time this year Bessent has gotten overexcited that rewriting financial rules will help meet the country's vast and growing borrowing needs. In April, he said his loosening of constraints on the balance sheets of big banks would increase their appetite for holding treasuries—but it will only help them trade bonds and lend more to hedge funds.

This time, he's pumping up the prospects of rapid growth in stablecoins since the US passed the Guiding and Establishing National Innovation for US Stablecoins Act to give the tokens a firmer regulatory footing. Bessent told Congress in June he expects that the market could grow to $2 trillion from less than $300 billion now. He's now telling Wall Street that a lot of this will flow straight into treasury bills and bonds, according to the Financial Times.