The rate was actually reduced. The amount of the increase was below half of the $21 trillion recorded in the period in the previous year, which the IIF attributed to high interest rates, higher servicing costs, increased energy costs, and the negative impact of the Iran conflict on investor sentiment.
Who is lending to Washington is changing
In this regard, another letter written by the economists of the Federal Reserve Bank of San Francisco and released on September 28 discusses a different but related aspect of the issue, namely the actual creditors of the Treasury. In recent years, US government indebtedness has risen from roughly 35% of the GDP in 2006 to 100%, and the composition of lenders has changed as well.
Traditionally, the major creditors were foreigners. According to the authors, the share of foreign investors has decreased from more than 50% at its peak in the late 2000s to about 30% by early 2026. In particular, foreign governments reduced their investments the most. Back in the 1970s, they were the exclusive purchasers of American Treasuries, and their share declined to only 40% by early 2026. China is responsible for this decline because its Treasury purchases are cut in half in mid-2026.
On the other hand, private buyers stepped into this niche, and the letter mentions a new category, namely stablecoin issuers. Since 2023, those issuers have added short-term Treasuries faster than Japan, the largest foreign holder of US government debt. The study documents the build-up over the past five years; Cryptopolitan has previously reported that increase at roughly $200 billion.
Why stablecoins hold Treasury bills
This is because of the structure. Stablecoins offer token owners a dollar-for-dollar exchange back to dollars; therefore, the issuers maintain reserves in low-risk and highly liquid forms, mostly in short-term Treasury bills, to fulfill redemptions. The San Francisco Fed explained that the structure was similar to a bank that needed to have enough cash reserves to cover withdrawals, noting that questions surrounding convertibility may precipitate a run.
The structure is now mandated by US laws. The issuance of the GENIUS Act in 2025 established the first-ever set of federal regulations for payment stablecoins, stipulating that issuers hold tokens backed one-for-one by eligible assets, which include Treasury bills, among others, according to an analysis by Brookings economists Nellie Liang and Brent Neiman in August. The size of the total stablecoin market is pegged at about $270 billion as of June 2026.
The San Francisco Fed expects this Treasury demand to continue increasing. Assuming that the present trajectory persists, the demand from issuers for short-term Treasury bills may increase almost two times by 2030 to reach roughly $400 billion. This would still be well below the borrowing requirement of Washington, DC, but significant enough to have some influence, according to the paper’s authors, as shown by Bank for International Settlements studies, where the demand for stablecoins is strong enough to influence short-term bond yields. According to the IMF, in its report on tokenization, stablecoins are a rapidly growing type of quasi-money backed by securities.
