In the United States Capitol, a piece of legislation known as the “Beautiful Law” is being rapidly advanced. Deutsche Bank’s latest report characterizes it as the “Pennsylvania Plan” for the U.S. to address its massive debt—by mandating the purchase of U.S. Treasury bonds with stablecoins, integrating 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% backed by cash, U.S. Treasury bonds, or bank deposits. It marks a fundamental shift in the regulation of stablecoins. The bill requires stablecoin issuers to maintain reserves of 1:1 USD or highly liquid assets (such as short-term U.S. Treasury bonds) and prohibits algorithmic stablecoins while establishing a dual regulatory framework at the federal and state levels. Its goals are clear:

• Relieving pressure on U.S. Treasuries: Mandatory allocation of stablecoin reserve assets to the U.S. Treasury market. According to the U.S. Treasury Department’s forecast, the global stablecoin market value will reach $2 trillion by 2028, with $1.6 trillion flowing into U.S. Treasuries, providing a new financing channel for the U.S. fiscal deficit.
• Consolidating the Dollar’s Hegemony: Currently, 95% of stablecoins are pegged to the dollar, and the legislation creates a closed loop of “Dollar → Stablecoin → Global Payments → Return of US Debt,” reinforcing the dollar’s “on-chain minting authority” in the digital economy.
• Promoting expectations for interest rate cuts: A Deutsche Bank report points out that the passage of the bill puts pressure on the Federal Reserve to cut interest rates in order to reduce the financing costs of U.S. Treasury bonds, while guiding the dollar to weaken and enhance the competitiveness of U.S. exports.

The US debt bottleneck, stablecoins become policy tools

The total federal debt in the United States has exceeded $36 trillion, with principal and interest repayments reaching up to $9 trillion by 2025. In the face of this “debt dam”, the Trump administration urgently needs to open new financing channels. Meanwhile, stablecoins, a financial innovation that once lingered on the fringes of regulation, unexpectedly became the White House’s lifeline.

According to signals from the Boston Money Market Fund Seminar, stablecoins are being cultivated as “new buyers” in the US Treasury market. Yie-Hsin Hung, CEO of State Street Global Advisors, stated: “Stablecoins are creating significant new demand for the Treasury market.”

Numbers speak for themselves: the current total market value of stablecoins is $256 billion, of which about 80% is allocated to U.S. Treasury bills or repurchase agreements, totaling approximately $200 billion. Although it accounts for less than 2% of the U.S. Treasury market, its growth rate has caught the attention of traditional financial institutions.

Citibank predicts that by 2030, the market value of stablecoins will reach between $1.6 trillion and $3.7 trillion, at which point the scale of U.S. Treasury bonds held by issuers will exceed $1.2 trillion. This volume is sufficient to rank among the largest holders of U.S. Treasuries.

Thus, 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, accounting for 0.5% of US national debt. If the scale expands to $2 trillion (with 80% allocated to US Treasuries), the holdings will exceed those of any single country. This mechanism may:

• Distorted financial markets: Short-term U.S. Treasury demand surges, suppressing yields and steepening the yield curve, weakening the effectiveness of traditional monetary policy.
• Weaken capital controls in emerging markets: The cross-border flow of stablecoins bypasses the traditional banking system, undermining the ability to intervene in exchange rates (as seen in the 2022 crisis in Sri Lanka due to capital flight).

Bill scalpel, financial engineering for regulatory arbitrage

The “Beautiful Grand Act” and the GENIUS Act constitute a sophisticated policy combination. The latter serves as a regulatory framework, mandating stablecoins to act as “buyers” of U.S. Treasury bonds; the former provides issuance incentives, creating a complete closed loop.

The core design of the bill is filled with political wisdom: when users purchase stablecoin with 1 dollar, the issuer must use that 1 dollar to buy U.S. Treasury bonds. This not only meets compliance requirements but also achieves fiscal financing goals. Tether, as the largest stablecoin issuer, net purchased 33.1 billion dollars in U.S. Treasury bonds in 2024, becoming the seventh largest buyer of U.S. Treasury bonds in the world.

The regulatory tiered system reveals a clearer intention to support oligopolies: stablecoins with a market capitalization of over $10 billion are directly regulated by the federal government, while smaller players are left to state-level agencies. This design accelerates market concentration, with Tether (USDT) and Circle (USDC) currently accounting for over 70% of the market share.

The bill also includes exclusivity clauses: it prohibits non-U.S. dollar stablecoins from circulating in the U.S. unless they are subject to equivalent regulation. This both consolidates the dollar’s hegemony and clears the way for the USD1 stablecoin supported by the Trump family—this coin has already secured a $2 billion investment commitment from Abu Dhabi investment firm MGX.

Debt shifting chain, the rescue mission of stablecoins

In the second half of 2025, the U.S. Treasury bond market will face a supply increase of 1 trillion dollars. In the face of this flood, stablecoin issuers are expected to play a significant role. Mark Cabana, head of interest rate strategy at Bank of America, pointed out: “If the Treasury shifts to short-term debt financing, the demand increase brought by stablecoins will provide the Treasury Secretary with policy space.”

The mechanism design is exquisite:

• For every 1 dollar stablecoin issued, 1 dollar of short-term US Treasury bonds must be purchased, directly creating a financing channel.
• The growth in demand for stablecoins translates into institutional purchasing power, reducing government financing uncertainty.
• Issuers are forced to continuously increase their reserve assets, creating a self-reinforcing demand loop.

Adam Ackermann, the portfolio manager at fintech company Paxos, revealed that several top international banks are in discussions about stablecoin collaboration, inquiring about “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 primarily anchored to short-term U.S. Treasuries, providing no substantial help to the supply-demand imbalance of long-term U.S. Treasuries. Moreover, the current size of stablecoins is still insignificant compared to U.S. Treasury interest payments — the total global stablecoin market is $232 billion, while annual interest on U.S. Treasuries exceeds $1 trillion.

The rise of new dollar hegemony and on-chain colonialism

The deeper strategy of the bill lies in the digital upgrade of dollar hegemony. 95% of global stablecoins are pegged to the dollar, creating 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, reducing transaction costs by more than 70%. This “informal dollarization” accelerates the penetration of the dollar in emerging markets.

The deeper impact lies in the paradigm revolution of the international clearing system:

• Traditional 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 in US dollars breaks the boundaries of traditional financial institutions, achieving an upgrade in “digital hegemony”.

The EU has clearly recognized the threat. Its MiCA regulation restricts the daily payment functions of non-euro stablecoins and imposes an issuance ban on 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 licensing system, it plans to introduce a dual licensing system for over-the-counter trading and custodial services. The Monetary Authority also plans to release operational guidelines for the tokenization of real-world assets (RWA) to promote the on-chain integration of traditional assets such as bonds and real estate.

Risk transmission network, countdown of a time bomb

The bill buries three structural risks:

First Layer: U.S. Treasury - Stablecoin Death Spiral. If users collectively redeem USDT, Tether must sell U.S. Treasuries for cash → U.S. Treasury prices plummet → Other stablecoin reserves devalue → Total collapse. In 2022, USDT briefly depegged due to market panic, and similar events in the future may impact the U.S. Treasury market due to the scale of the situation.

Second layer: The risks of decentralized finance are amplified. After stablecoins flow into the DeFi ecosystem, they are leveraged through liquidity mining, lending, and staking operations. The restaking mechanism causes assets to be repeatedly staked across different protocols, leading to a geometric amplification of risk. Once the value of the underlying assets plummets, it may trigger a cascading liquidation.

The third layer: loss of monetary policy independence. A Deutsche Bank report directly points out that the bill will “pressure the Federal Reserve to cut interest rates.” The Trump administration indirectly gains “printing rights” through stablecoins, which may undermine the independence of the Federal Reserve—Powell has recently rejected political pressure, suggesting that a rate cut in July is unlikely.

Complicating matters, the U.S. debt-to-GDP ratio has exceeded 100%, and the credit risk of U.S. debt itself is rising. If U.S. debt yields continue to be inverted or expectations of default arise, the safe-haven attribute of stablecoins will be in jeopardy.

The global new chess game, the on-chain reconstruction of economic order

In the face of American actions, the world is forming three major camps:

• Regulatory Integration Camp: Canadian banking regulators have announced they are ready to regulate stablecoins, with a framework being developed. This echoes the regulatory trends in the United States, forming a North American collaborative situation. Coinbase will launch US-style perpetual contracts in July, using stablecoin to settle funding rates.
• Innovation in Defensive Camp: Hong Kong and Singapore present regulatory path differentiation. Hong Kong adopts a prudent tightening approach, positioning stablecoins as “virtual banking substitutes”; Singapore, on the other hand, implements a “stablecoin sandbox” allowing experimental issuance. This difference may trigger regulatory arbitrage and weaken the overall competitiveness of Asia.
• Alternative camp: In countries with high inflation, the public regards stablecoins as “safe-haven assets,” weakening the circulation of local currency and the effectiveness of central bank monetary policy. These countries may accelerate the development of local stablecoins or multilateral digital currency bridge projects, but they face severe trade challenges.

And the international system will also undergo changes: from a unipolar to a “hybrid architecture,” the current reform proposal presents three paths:

• Diversified Currency Alliance (highest probability): the US dollar, euro, and renminbi form a tripartite reserve currency, supplemented by a regional settlement system (such as the ASEAN multilateral currency swap).
• Competition in Digital Currency: 130 countries are developing Central Bank Digital Currencies (CBDCs), and the digital renminbi has begun pilot programs for cross-border trade, which may reshape payment efficiency but faces the challenge of sovereignty transfer.
• Extreme Fragmentation: If geopolitical conflicts escalate, it may lead to a divided camp of US dollars, euros, and BRICS currencies, resulting in a surge in global trade costs.

PayPal CEO Alex Chriss pointed out a key bottleneck: “From a consumer perspective, there is currently no real incentive to drive the adoption of stablecoins.” The company is launching a rewards mechanism to address the adoption issue, while decentralized exchanges like XBIT are solving trust issues through smart contracts.

Deutsche Bank’s report predicts that with the implementation of the “Beautiful Big Plan”, the Federal Reserve will be forced to cut interest rates, leading to a significant weakening of the dollar. By 2030, when stablecoins hold $1.2 trillion in U.S. Treasury bonds, the global financial system may have quietly completed its on-chain reconstruction—U.S. dollar hegemony embedded in every transaction on the blockchain in code, while risks are spread to every participant through a decentralized network.

Technological innovation has never been a neutral tool. As the US dollar dons the attire of blockchain, the game of the old order is being played out on a new battlefield!

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