How stablecoins are reshaping the US Treasury Market

The Stablecoin market is growing at a rapid pace. It was reported by AInvest that the market capitalization of stablecoins increased by 17% from early 2025 to the present moment, surpassing $228 billion. What does this mean for financial markets, such as Treasury Bills?

As we explored in our latest article on stablecoins, this new financial model, based on digital assets pegged to fiat or commodities, is reshaping the future of digital payments. But stablecoins are also transforming another institutional area of the financial system: Treasury Bills (T-Bills). 

These investment instruments are short-term debt securities issued by a government, among which the most notable is the US Department of the Treasury, with the purpose of gathering monetary value to fund the State debts, as well as their social and economic programs.

According to SIFMA, in May 2025 the total outstanding Treasury market was approximately $28.6 trillion, with daily trades reaching $1.12 trillion, which represents a 27.6% year-over-year increase. This symbolizes the exponential growth of T-bills, which are an ever more attractive instrument for short-term investors. 

Reuters states that currently there are $200 billion held in stablecoins, like USDT and USDC, creating a significant new class of investors and opening up significantly the potential buyer market. In this article, the same source indicates that at a recent conference in Boston, investors admitted to expecting these digital tokens to “absorb a huge supply of government debt later this year”.

The crucial role of stablecoins in the current market

We are now at the midpoint of 2025, with stablecoins gaining more traction than ever. Recently, these alternative currencies have crossed a major milestone, surpassing $252 billion in combined market cap, with over 70% of that value represented by US dollar-backed coins like USDC, USDT, and PYUSD.

There are several factors that contribute to the massive stablecoin adoption we are now witnessing: institutional adherence, with funds, fintechs, and payment processors integrating stablecoins into their products and processes; regulatory certainty, with MiCa in the EU and an ever more clear regulatory landscape in the US; and compatibility with financial apps, such as Telegram, Shopify, and Stripe, which now support stablecoin payments and settlements.

How are Treasury Bills being affected

Most fiat-backed stablecoins are supported by reserves, which now include a growing proportion of short-term US Treasury bills, such as those with 3-month and 6-month maturities. These are considered low-risk, highly liquid government debt instruments that provide stable and very attractive yields. 

Currently, major players such as Circle (USDC) and Tether (USDT) hold a massive amount of T-bill issuance. According to a report by Bain & Company, cited by Reuters, they collectively hold $166 billion in US Treasuries - primarily short‑dated bills - making them among the largest non‑sovereign holders of the country’s debt.

This shows a shift in the traditional market, as these issuers become huge T-bill buyers, competing directly with money funds.This change affects the distribution of wealth and blurs the line between crypto-native and conventional finance. As the adoption grows, transparency, regulatory compliance, and integration with legacy banking systems are expected to be guaranteed. 

How are US T-bills being impacted

The US is in a unique position in the market, as it incorporates both sides: many of the stablecoin market leaders are headquartered in the country based on the US dollar, and the nation is also issuing the underlying assets (T-bills) that back these coins.

As we move forward, a few changes are anticipated in the country’s policy, with US lawmakers introducing stablecoin legislation focusing on reserve quality, audit transparency, and licensure. Simultaneously, an increase in Treasury value is expected because as the demand for short-term debt increases, stablecoin adoption indirectly strengthens demand for US sovereign debt.

Why it matters for Web3 business

Web3 businesses can take advantage of this movement towards a more decentralized financial backing for T-bills, namely:

1. More stability and credibility of on-chain USD

When stablecoins are backed by T-bills, their risk profile decreases and shifts closer to traditional finance-grade products. This makes Web3 payments, payroll, lending, and settlements more trustworthy, especially for institutional users.

2. Improved yield design for Web3 platforms

As web3 players become more involved in shaping these assets, they can drive their outlook closer with their needs. 

T-bill yields, which range from 4 to 5%, are very appealing to stablecoin issuers, and some platforms (like Ethena or Mountain Protocol) offer a yield percentage to users, making them extra appealing. This could redefine DeFi savings accounts, staking vaults, and DAO treasuries that seek low-risk yield while avoiding lending/borrowing uncertainty. In the future, Web3 apps can design new yield-bearing stablecoin products, creating native savings layers.

3. Higher liquidity reliability

Stablecoins backed by liquid T-bills are less susceptible to withdrawal blockers, which often occur with other assets during periods of financial stress. Their underlying assets can be sold almost instantly in large amounts, ensuring liquidity even through financial crises. Web3 businesses using stablecoins in automated systems (liquidity pools, remittances, and payments) can expect smoother performance under volatility.

4. Better regulatory alignment

Many jurisdictions (US, EU, Singapore) now require safe, transparent reserves for regulated stablecoins. As we move forward, compliance will be key for onboarding regulated institutions, namely traditional banking, as well as web3 platforms, fintechs, and neobanks.

Conclusion

Stablecoins have become much more than just a crypto convenience, as they now play a key role and are a structural feature of global markets, especially in the demand for short-term Treasuries. As their role expands across payments, remittances, and fintech rails, their influence on macroeconomic mechanics will only deepen.

For businesses and institutional players, it’s not just about watching the stablecoin market anymore. It’s much more about engaging with it strategically. At Skyline Digital, we help you track these shifts in the financial market and identify the best opportunities where digital assets meet traditional yield.

Want to stay ahead of the fintech changes? Reach out to our team today.