Who really owns America’s debt? And does it matter if it’s China—or Circle?

(Originally posted on LinkedIn - join the conversation there!)

For decades, U.S. Treasury demand has been shaped largely by foreign governments. China, once the second-largest holder of U.S. debt, has been steadily reducing its position, offloading $400B+ in Treasuries since 2013. Just this year, its holdings dipped below the $800B mark for the first time in over a decade.

A new buyer has quietly emerged: stablecoin issuers. Today, major stablecoins like USDC and USDT are backed in part by short-term U.S. Treasuries. Tether alone reportedly holds over $90B in U.S. Treasuries. The marginal buyer of U.S. debt is shifting from nation-states to crypto-native private companies.

This shift raises some provocative questions for the future of monetary policy, economic sovereignty, and risk:

➡️ Have stablecoins made a dent in foreign ownership?
The data suggests yes. As foreign central banks de-dollarize or shift reserves, private sector demand is filling the gap. Stablecoins are unique in that they’re creating on-demand, decentralized dollar instruments that sit outside the traditional banking system.

➡️ Should we be more afraid of Circle owning Treasuries than China?
It’s a fair question. At face value, private sector demand seems more market-driven and less geopolitically fraught. But concentration risk is real. If one issuer were to collapse, there could be sudden, sizable liquidity shocks in the short-term Treasury market.

➡️ How does this impact interest rates and policy?
Stablecoins may act as a buffer, keeping demand for Treasuries high even as traditional buyers back away. That could help to keep yields low, but it may have unforeseen impacts on the Fed's monetary toolkit.

As Bloomberg's Matt Levine recently wrote, stablecoin issuers function like narrow banks, entities that park deposits in U.S. Treasuries and reserves at the Fed but don’t make loans. This model contrasts with the traditional financial system, where banks use deposits to fund lending, a key mechanism for economic growth. If more dollars migrate to narrow-bank-like structures, it could shift how credit is created and overall liquidity.

This isn’t just about crypto, it’s about who holds the power to drive demand in a $28T market. As seen below, the Treasury holdings of players like Tether.io and Circle are already almost on par with the largest global banks.

As stablecoins become more deeply embedded in global markets, it’s worth asking: What frameworks, if any, should exist to ensure transparency in reserves, resilience in liquidity, and accountability from issuers?

At Loop Crypto, we are focused on the utility of stablecoins as a payment mechanism. The scalability of this new rail is tied to the underlying trust individuals place in these digital dollars.

The infrastructure behind the dollar is rapidly evolving. The question isn’t if crypto will shape global capital flows, it’s how, and who benefits.

What’s your take on this emerging shift in Treasury ownership?