Stablecoin issuers step into the Treasury demand China gave up

A San Francisco Fed paper finds issuers have replaced 40% of the US Treasury demand lost as foreign official holdings fell.

Assembled by Claude from 9 sources at 8 outlets · Sunday, October 4, 2026, Morning edition, 10:23 AM EDT · no human byline

What happened

Stablecoin issuers have replaced 40% of the US Treasury demand lost by China, according to reporting on new central bank work cryptonews.netcryptorank.io. The San Francisco Fed estimates that issuers are becoming an increasingly important source of Treasury demand crypto-economy.com. The paper, released on 28 September, is titled Stablecoin Issuers' Growing Appetite for Treasury Securities thestreet.com. Issuers' Treasury holdings are put at nearly $200 billion cryptoslate.com. The shift is beginning to alter the investor base underpinning the world's largest government bond market cryptonews.net, with Tether and Circle identified as the issuers taking up the slack as foreign official holdings lose ground cryptorank.io.

The size of the sector is disputed within the same day's coverage. Two reports put the stablecoin market above $310 billion pluang.comkucoin.com, while another put it at $300.9 billion cryptotimes.io. A fourth said market capitalisation has fallen by $14 billion since May and that the recovery remains weak kucoin.com. Within the quarter, Tron added $5 billion of stablecoin supply while Ethereum's supply declined by $4.9 billion cryptotimes.io.

Why it matters to investors

The composition of the buyer base for short-dated government debt is changing, not just its size. Foreign official holdings are losing ground and private issuers are replacing part of that demand cryptorank.io, against a global debt stock reported at $365 trillion crypto-economy.com. A buyer whose holdings track token issuance behaves differently from a central bank: the demand grows and shrinks with retail and trading flows rather than with reserve policy cryptonews.netkucoin.com.

Europe is moving the other way on access. The European Securities and Markets Authority has proposed ending EU custody and transfer services for non-compliant stablecoins cryptoslate.com.

What to watch

The clearest unresolved tension is between rising issuer Treasury holdings of nearly $200 billion and a token supply that one report says has shrunk by $14 billion since May cryptoslate.comkucoin.com. The reports do not reconcile the two, and the market-size figures themselves differ by roughly ten billion dollars depending on the source pluang.comcryptotimes.io.

Three markers. Whether the issuance picture turns, with Tether relaunching USDT on the Bitcoin network and Circle launching cirBTC pluang.comkucoin.com. Whether supply keeps migrating between chains as it did in the third quarter, when Tron gained and Ethereum lost cryptotimes.io. And whether the ESMA proposal forces issuers to restructure the reserves they hold against euro-area users, which would change where the Treasury bills sit cryptoslate.com.

Sources

1. crypto-economy.com: Global Debt Surges to $365T as Stablecoins Fuel Growing Treasury Demand (2026-10-03)
2. cryptoslate.com: ESMA proposes ending EU custody and transfer services for non-compliant stablecoins (2026-10-03)
3. cryptonews.net: Stablecoin issuers have replaced 40% of China's lost US Treasury demand (2026-10-03)
4. thestreet.com: Fed finds a silver lining as China sells U.S. Treasuries - TheStreet Crypto (2026-10-03)
5. pluang.com: Stablecoin liquidity rises above $310B, boosting Bitcoin demand outlook for Q4. - Pluang (2026-10-04)
6. kucoin.com: Stablecoin Market Surpasses $310B as USDT and cirBTC Boost BTC Liquidity - KuCoin (2026-10-04)
7. kucoin.com: Stablecoin market cap falls $14 billion since May, recovery remains weak - KuCoin (2026-10-03)
8. cryptorank.io: Stablecoin issuers have replaced 40% of China's lost US Treasury demand - CryptoRank (2026-10-03)
9. cryptotimes.io: Stablecoin Market Reaches $300.9B as Tron Gains $5B in Q3 - The Crypto Times (2026-10-03)