Stablecoins Emerge As Strategic Buyers As US Debt Interest Hits 1 Trillion

TLDR

Table of Contents

US debt interest reached 1 trillion in 2025, exceeding defense and Medicare spending.
Debt-to-GDP hit 100% and could surpass 106% by 2029 according to projections.
GENIUS Act requires stablecoins to hold reserves in dollars or Treasury bills.
Stablecoin issuers could purchase 1.6 trillion in Treasuries over the next four years.

The United States reached a historic milestone in 2025 as interest payments on federal debt surpassed $1 trillion. This figure now exceeds combined spending on defense and Medicare, marking a new fiscal reality. Amid this rising debt burden, stablecoins are emerging as structured buyers of U.S. Treasuries. Analysts note that this development could link cryptocurrency markets with government debt management in unprecedented ways.

Historic rise in federal interest payments

In fiscal year 2020, net U.S. interest payments totaled $345 billion. By 2025, that figure nearly tripled to $970 billion. When accounting for all interest on publicly held debt, payments crossed $1 trillion for the first time. This milestone reflects the growing cost of servicing existing debt amid rising interest rates and federal borrowing.

Stablecoin issuers now hold over $120 billion in US government debt, more than many sovereign reserve managers.
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The Congressional Budget Office projects that cumulative interest payments over the next decade could total $13.8 trillion. This represents nearly double the inflation-adjusted amount spent over the previous twenty years. Analysts warn that as interest costs rise, government finances may face increasing pressure, prompting searches for alternative financial tools.

Debt-to-GDP surpasses critical thresholds

The U.S. debt-to-GDP ratio reached 100% in 2025, a level not seen since the aftermath of World War II. Projections indicate the ratio may exceed the 1946 peak of 106% by 2029 and climb to 118% by 2035. Approximately half of annual borrowing is now dedicated solely to servicing existing debt, a factor that has drawn attention from policymakers and investors alike.

Chris Towner of the Committee for a Responsible Federal Budget highlighted the self-reinforcing nature of rising debt service. He noted that higher interest rates could force the government to borrow even more to pay debt, potentially creating a cycle of increased borrowing and cost escalation.

Stablecoins positioned as strategic buyers

The GENIUS Act, signed in July 2025, requires stablecoin issuers to hold 100% of reserves in U.S. dollars or short-term Treasury bills. This requirement effectively positions stablecoins as structural buyers of government debt. Treasury Secretary Scott Bessent described stablecoins as “a revolution in digital finance” and said they are expected to “lead to a surge in demand for U.S. Treasuries.”

Standard Chartered estimates that stablecoin issuers could purchase up to $1.6 trillion in Treasury bills over four years. This volume would be sufficient to absorb a significant portion of new government debt issuance, potentially offsetting reduced purchases from foreign central banks.

Market reactions and long-term outlook

Investors in traditional markets have increasingly turned toward gold, silver, and real estate in response to rising debt concerns. Stablecoins, however, are quietly becoming a bridge between digital finance and government securities.

Rising Treasury issuance and risk-free yields near 5% have created structural headwinds for equities and cryptocurrencies. Yet, the increasing role of stablecoins in purchasing government debt may stabilize liquidity flows and provide a new avenue for digital finance integration. Analysts suggest that as conventional finance faces pressures, stablecoins could strengthen their position in both the crypto ecosystem and national debt markets.