Stablecoins could become an essential source of funding for the U.S. government

According to Odaily, the GENIUS Act was passed by the U.S. Senate this week, potentially positioning stablecoins as a significant funding source for the U.S. government. U.S. Treasury Secretary Besant praised the GENIUS Act, suggesting that a regulated and expanding stablecoin market could create new buyers for U.S. government debt, thereby increasing private sector demand for U.S. Treasury securities. Besant previously informed the U.S. House Financial Services Committee in May that there are speculations that the stablecoin market could require up to $2 trillion in U.S. government securities in the coming years.

However, analysts warn that the stablecoin industry is unlikely to fully resolve the challenges of U.S. government debt financing and could introduce additional risks. The increase in demand for stablecoins will take time to develop, while the U.S. Treasury needs to issue a substantial amount of debt securities within the year. If issues arise that prevent the Federal Reserve from lowering interest rates, the U.S. deficit could become uncontrollable.