I just reviewed a very interesting analysis from Standard Chartered on how stablecoins could completely reshape the U.S. debt market in the coming years.

The thesis is clear: if stablecoins reach $2 trillion in market capitalization by the end of 2028, we will see massive demand for Treasury bills. We're talking about roughly $1 trillion in new T-bill demand, essentially.

Now, here’s where it gets interesting. If we add that to the approximately $1.2 trillion the Fed projects to buy during the same period, the total demand for short-term bills could be around $2.2 trillion. But the estimated net supply is only about $1.3 trillion. The potential deficit: nearly $900 billion.

Geoff Kendrick and John Davies, the analysts behind this, suggest that the Treasury will likely have to increase short-term bond issuance. They might even pause 30-year auctions to meet this rising demand at the short end of the curve. If they increase the share of bills by 2.5 percentage points over three years, they would generate roughly an additional $900 billion, closing the gap.

What’s really happening here is that Tether, Circle, and other stablecoin issuers have become serious buyers of government debt. Tether alone holds Treasury bonds rivaling those of medium-sized sovereign investors. Circle also has a significant portion in bills through money market funds. When new capital flows into stablecoins, much of it ends up in T-bills to generate yield and maintain liquidity.

The Treasury saw this coming. In its February 4 announcement, it mentioned that it is monitoring both the Fed’s purchases and the growing private demand for bills. Standard Chartered believes this trend will intensify quite a bit.

Now, there’s an important asterisk: the growth of stablecoins has recently stalled. We’re around $300-320 billion, just a slight increase from $238 billion a year ago. Bitcoin has fallen more than 50% since October, which weakened trading-driven demand. But analysts see this as a temporary slowdown, not permanent.

If Standard Chartered is right and stablecoins hit that $2 trillion mark by 2028, we’re talking about a serious overhaul of the U.S. rate market. Treasury bill demand could become the dominant factor in the coming years.