Behind the "Beautiful Bill": a financial experiment to direct the US debt dam to stablecoins

Author: Mask, W3C DAO

A financial experiment spawned by the $36 trillion national debt crisis is trying to transform the crypto world into a "buyer" of U.S. debt, while the global monetary system has been quietly reshaped.

In the U.S. Capitol, a piece of legislation called the "Beautiful Big Bill" is being pushed forward at full speed. Deutsche Bank's latest report characterizes it as the "Pennsylvania Plan" for the United States to deal with its massive debt - by forcing stablecoins to purchase U.S. debt and incorporating digital dollars into the national debt financing system.

This bill forms a policy combination with the GENIUS Act, which has already mandated that all USD stablecoins must be 100% held in cash, US Treasury bonds or bank deposits. It marks a fundamental shift in the regulation of stablecoins. The bill requires stablecoin issuers to use 1:1 US dollars or highly liquid assets (such as short-term US Treasury bonds) as reserves, prohibits algorithmic stablecoins, and establishes a dual-track regulatory framework at the federal and state levels. Its goals are clear:

• Relieve pressure on U.S. debt: Force stablecoin reserve assets to be invested in the U.S. debt market. According to the U.S. Treasury Department's forecast, the global stablecoin market value will reach $2 trillion by 2028, of which $1.6 trillion will flow into U.S. debt, providing a new financing channel for the U.S. fiscal deficit.

• Consolidating the dollar's hegemony: Currently 95% of stablecoins are anchored to the dollar. The bill strengthens the dollar's "on-chain minting rights" in the digital economy through the closed loop of "dollar → stablecoin → global payment → U.S. debt repatriation".

• Driving expectations of rate cuts: The Deutsche Bank report pointed out that the bill puts pressure on the Federal Reserve to cut interest rates to reduce U.S. debt financing costs, while guiding the dollar to weaken and enhance U.S. export competitiveness.

US debt is a dam, and stablecoins have become a policy tool

The total US federal debt has exceeded 36 trillion US dollars, and the principal and interest to be repaid in 2025 will be as high as 9 trillion US dollars. Faced with this "debt barrier", the Trump administration urgently needs to open up new financing channels. Stablecoins, a financial innovation that once lingered on the edge of regulation, unexpectedly became a lifeline for the White House.

According to signals from the Boston Money Market Fund Seminar, stablecoins are being cultivated as "new buyers" in the U.S. bond market. Yie-Hsin Hung, CEO of State Street Global Advisors, said bluntly: "Stablecoins are creating considerable new demand for the Treasury market."

The numbers speak for themselves: the current total market value of stablecoins is $256 billion, of which about 80% is allocated to U.S. Treasury bonds or repurchase agreements, with a scale of about $200 billion. Although it accounts for less than 2% of the U.S. Treasury market, its growth rate has attracted the attention of traditional financial institutions.

Citigroup predicts that by 2030, the market value of stablecoins will reach 1.6 to 3.7 trillion U.S. dollars, and the scale of U.S. debt held by issuers will exceed 1.2 trillion U.S. dollars, which is enough to rank among the largest holders of U.S. debt.

Therefore, stablecoins have become a new tool for the internationalization of the US dollar. For example, leading stablecoins such as USDT and USDC hold nearly $200 billion in US Treasury bonds, equivalent to 0.5% of US Treasury bonds. If the scale is expanded to $2 trillion (80% of which is allocated to US Treasury bonds), the holdings will exceed those of any single country. This mechanism may:

• Distorted financial markets: The surge in demand for short-term U.S. Treasuries has pushed down yields, steepened the yield curve, and weakened the effectiveness of traditional monetary policy.

• Weakening capital controls in emerging markets: Cross-border flows of stablecoins bypass the traditional banking system and weaken the ability to intervene in exchange rates (such as the crisis in Sri Lanka in 2022 due to capital flight).

Bill scalpel, financial engineering of regulatory arbitrage

The "Beautiful Big Bill" and the "GENIUS Act" form a sophisticated policy combination. The latter, as a regulatory framework, forces stablecoins to become the "buyers" of U.S. debt; the former provides issuance incentives, forming a complete closed loop.

The core design of the bill is full of political wisdom: when a user buys a stablecoin with $1, the issuer must use the $1 to buy U.S. Treasuries. This not only meets compliance requirements, but also achieves fiscal financing goals. As the largest stablecoin issuer, Tether purchased a net $33.1 billion in U.S. Treasuries in 2024, becoming the world's seventh largest buyer of U.S. Treasuries.

The regulatory hierarchical system further reveals the intention of supporting oligarchs: stablecoins with a market value of more than $10 billion are directly regulated by the federal government, while small players are handed over to state-level agencies. This design accelerates market centralization, and Tether (USDT) and Circle (USDC) currently occupy more than 70% of the market share.

The bill also contains an exclusive clause: non-US dollar stablecoins are prohibited from circulating in the United States unless they are subject to equivalent supervision. This not only consolidates the hegemony of the US dollar, but also clears the way for the USD1 stablecoin supported by the Trump family, which has received a $2 billion investment commitment from Abu Dhabi investment company MGX.

Debt transfer chain, the mission of stablecoin to save the market

In the second half of 2025, the U.S. Treasury market will see an increase in supply of $1 trillion. Facing this peak, stablecoin issuers are expected to have a bright future. Mark Cabana, head of interest rate strategy at Bank of America, pointed out: "If the Treasury Department turns to short-term debt financing, the increase in demand brought by stablecoins will provide policy space for the Treasury Secretary."

The mechanism design is ingenious:

- For every $1 of stablecoin issued, $1 of short-term U.S. Treasury bonds must be purchased, directly creating a financing channel

- The growth in stablecoin demand translates into institutional purchasing power, reducing government financing uncertainty

- Issuers are forced to continue to hold more reserve assets, creating a self-reinforcing demand cycle

Adam Ackermann, portfolio manager at fintech company Paxos, revealed that several top international banks are negotiating on stablecoin cooperation, asking “how to launch a stablecoin solution within eight weeks.” The industry’s enthusiasm has reached its peak.

But the devil is in the details: stablecoins are mainly anchored to short-term US Treasury bonds, which does not substantially help the supply and demand contradiction of long-term US Treasury bonds. Moreover, the current scale of stablecoins is still insignificant compared with the interest expenditure of US Treasury bonds - the total scale of global stablecoins is US$232 billion, while the annual interest of US Treasury bonds exceeds US$1 trillion.

The new hegemony of the US dollar, the rise of on-chain colonialism

The underlying strategy of the bill is the digital upgrade of the US dollar hegemony. 95% of the world's stablecoins are anchored to the US dollar, building a "shadow dollar network" outside the traditional banking system.

Small and medium-sized enterprises in Southeast Asia, Africa and other regions use USDT for cross-border remittances, bypassing the SWIFT system and reducing transaction costs by more than 70%. This “informal dollarization” has accelerated the penetration of the US dollar in emerging markets.

The more far-reaching impact lies in the paradigm revolution of the international clearing system:

- Traditional US dollar clearing relies on interbank networks such as SWIFT

- Stablecoins are embedded in various distributed payment systems in the form of "on-chain dollars"

- The ability to settle US dollars breaks through the boundaries of traditional financial institutions and achieves an upgrade of "digital hegemony"

The EU is clearly aware of the threat. Its MiCA regulations restrict the daily payment functions of non-euro stablecoins and impose a ban on the issuance of large-scale stablecoins. The European Central Bank is accelerating the promotion of the digital euro, but progress is slow.

Hong Kong has adopted a differentiated strategy: while establishing a stablecoin license system, it plans to launch a dual licensing system for over-the-counter transactions and custody services. The HKMA also plans to issue operational guidelines for the tokenization of real-world assets (RWA) to promote the listing of traditional assets such as bonds and real estate on the blockchain.

Risk transmission network, countdown to the time bomb

The bill poses three structural risks:

The first level: US Treasury-stablecoin death spiral. If users collectively redeem USDT, Tether needs to sell US Treasury bonds for cash → US Treasury bond prices plummet → other stablecoin reserves depreciate → full collapse. In 2022, USDT was temporarily unpegged due to market panic. Similar events in the future may impact the US Treasury market due to the expansion of scale.

The second level: The risk of decentralized finance is amplified. After stablecoins flow into the DeFi ecosystem, they are leveraged layer by layer through operations such as liquidity mining and lending and staking. The restaking mechanism causes assets to be repeatedly pledged between different protocols, and the risk is amplified geometrically. Once the value of the underlying assets plummets, it may trigger a chain of liquidations.

The third level: loss of monetary policy independence. The Deutsche Bank report directly pointed out that the bill will "put pressure on the Federal Reserve to cut interest rates." The Trump administration indirectly obtains the "right to print money" through stablecoins, which may undermine the independence of the Federal Reserve. Powell has recently rejected political pressure and hinted that there is no hope for a rate cut in July.

What is more difficult is that the ratio of US debt to GDP has exceeded 100%, and the credit risk of US debt has risen. If the US debt yield continues to invert or there is an expectation of default, the safe-haven property of stablecoins will be in jeopardy.

A new global chess game: on-chain reconstruction of the economic order

In response to the US actions, three major camps are forming around the world:

• Regulatory integration camp: Canadian banking regulators announced that they are ready to regulate stablecoins, and the framework is being formulated. This echoes the US regulatory trend and forms a coordinated trend in North America. Coinbase will launch American perpetual contracts in July and use stablecoins to settle funding rates.

• Innovation defense camp: Hong Kong and Singapore show divergent regulatory paths. Hong Kong adopts a prudent tightening approach and positions stablecoins as a "virtual bank alternative"; Singapore promotes a "stablecoin sandbox" to allow experimental issuance. This difference may lead to regulatory arbitrage and weaken Asia's overall competitiveness.

• Alternative camp: People in countries with high inflation use stablecoins as "safe haven assets", weakening the circulation of local currencies and the effectiveness of central bank monetary policy. These countries may accelerate the development of local stablecoins or multilateral digital currency bridge projects, but face severe trade challenges.

The international system will also change: from unipolarity to a "hybrid architecture", and the current reform plan presents three paths:

• Diversified currency union (highest probability): The U.S. dollar, the euro and the renminbi form a tripolar reserve currency, supplemented by a regional settlement system (such as the ASEAN multilateral currency swap).

• Competition in digital currencies: 130 countries are developing central bank digital currencies (CBDCs). The digital RMB has been piloted in cross-border trade and may reshape payment efficiency but faces the challenge of sovereignty transfer.

• Extreme fragmentation: If geopolitical conflicts escalate or separate dollar, euro and BRICS currency camps are formed, global trade costs will surge.

PayPal CEO Alex Chriss pointed out the key bottleneck: "From a consumer perspective, there is currently no real incentive to promote the popularization of stablecoins." The company is launching a reward mechanism to solve the adoption problem, while decentralized exchanges such as XBIT are solving the trust problem through smart contracts.

The Deutsche Bank report predicts that with the implementation of the "Beautiful Big Bill", the Federal Reserve will be forced to cut interest rates and the US dollar will weaken significantly. By 2030, when stablecoins hold $1.2 trillion in US debt, the global financial system may have quietly completed the on-chain reconstruction - the US dollar hegemony is embedded in every transaction of the blockchain in the form of code, and the risk spreads to every participant through the decentralized network.

Technological innovation has never been a neutral tool. When the US dollar is dressed in the cloak of blockchain, the game of the old order is being played out on a new battlefield!