How stablecoins move sovereign yields – an empirical analysis
Rashad Ahmed and Inaki Aldasoro, in this paper, ask whether inflows into dollar-backed stablecoins, whose reserves are predominantly held in U.S. Treasury bills, exert measurable downward pressure on short-term Treasury yields.
The authors use daily data from January 2021 to March 2025, covering the six largest USD-backed stablecoins (USDT, USDC, TUSD, BUSD, FDUSD, PYUSD). The key outcome variable is the 3-month T-bill yield, chosen because stablecoin issuers publicly disclose a preference for sub-93-day maturities. As of December 2025, stablecoin issuers held $153 billion in U.S. T-bills, surpassing several major foreign sovereign investors.
Findings
- Baseline effect: A $3.5 billion stablecoin inflow lowers the 3-month T-bill yield by 2.5–3.5 basis points within 10–20 days. Effects are tightly concentrated at the short end; yields at 6-month and beyond show little to no response, consistent with stablecoin issuers’ preferred habitat.
- State-dependence: The effect is not uniform as it is statistically insignificant during periods of ample T-bill supply, but doubles to 5–8 bps during periods of bill scarcity.
- Issuer decomposition: USDT accounts for 67% of the aggregate yield effect, USDC 21%, and other issuers 12% which is broadly proportional to their market shares and T-bill reserve holdings.
- Forward-looking projections: Assuming the Treasury Borrowing Advisory Committee’s projection of $2 trillion stablecoin market cap by 2028, a 2-standard-deviation inflow would compress 3-month yields by 7.85–11 bps, an order of magnitude that could meaningfully impair the Fed’s monetary policy transmission to short-term market rates.
Policy Implications
The authors highlight three concerns: (i) stablecoins create a bridge through which crypto-market shocks transmit to sovereign debt markets; (ii) concentrated and opaque reserve holdings (especially Tether’s) create systemic risk in the event of a run, and call for standardized reserve disclosure mandates; and (iii) if the sector grows to the multi-trillion scale projected, stablecoin-driven yield compression could materially weaken the Fed’s control over short-term rates.
Stablecoins and safe asset prices
Authors: Rashad Ahmed, Inaki Aldasoro
From: Andersen Institute for Finance and Economics, BIS
How stablecoins move sovereign yields – a theoretical model
Massimo Ferrari Minesso, Daniele Siena build a three-country open-economy DSGE model (the U.S. plus two foreign economies) incorporating two novel features: (1) a U.S.-issued stablecoin used as a payment instrument globally, fully backed one-to-one by U.S. Treasury securities as mandated by the GENIUS Act framework; and (2) a convenience yield on U.S. bonds capturing their special safe-asset status, calibrated following Eren et al. (2025).
Households in all three countries can use stablecoins as an imperfect substitute for domestic money in a CES liquidity aggregator. Crucially, stablecoin demand is endogenously tied to issuer confidence, which declines with reserve portfolio volatility, negative carry risk, and run risk. Since the issuer’s balance sheet must hold exactly one U.S. Treasury per stablecoin outstanding, any fluctuation in global stablecoin demand maps one-for-one into changes in Treasury demand and therefore U.S. yields. This is the core “global safe asset channel.”
The model is simulated under three adoption scenarios: i) no stablecoins, ii) moderate adoption ($500 billion market cap, 1.3% of U.S. debt), and iii) large-scale adoption ($2 trillion, 5.4% of U.S. debt).
Findings
- Level effect: Stablecoin adoption structurally compresses U.S. short-term yields in equilibrium by adding persistent Treasury demand, but also requires the Fed to respond more aggressively to inflation shocks, since digital capital flows weaken domestic aggregate demand management.
- Amplified monetary pass-through: A U.S. monetary tightening causes the dollar to appreciate, generating valuation gains for foreign stablecoin holders who then redeem coins, forcing the issuer to sell Treasuries and thereby amplifying the yield rise. At $2 trillion market cap, U.S. output contracts roughly 30% less than without stablecoins (because the attenuated dollar appreciation supports exports), but yields rise more sharply.
- Foreign shock transmission: Shocks originating abroad are now transmitted back to U.S. Treasury markets through stablecoin portfolio rebalancing. A monetary tightening in a foreign country raises demand for stablecoins, which pushes down U.S. yields, amplifying two-way international spillovers by roughly 10% more on U.S. output.
- Macroeconomic stability risks are non-linear: The model shows that below $500 billion the standard Taylor principle suffices for stability, but beyond $2 trillion the required inflation response coefficient rises sharply because stablecoin flows weaken conventional monetary transmission.
- Macro-instability arises only from foreign stablecoin demand: A key robustness result shows that if stablecoins are held only domestically, spillovers are negligible. Destabilizing dynamics emerge exclusively from international adoption.
Private money and public debt. U.S. Stablecoins and the global safe asset channel
Authors: Massimo Ferrari Minesso, Daniele Siena
From: ECB
