I wrote this article How stablecoins are fueling a global US debt generalization on our Dracoon Ventures blog.
The article can be summarized as follows:
Approximately 70% or more of the fiat currencies backing US dollar stablecoins, especially USDT (Tether), originate from outside the US, with strong usage in Asia, Latin America, and the Middle East & Africa. Stablecoins act as a digital proxy for US public debt held mainly by overseas investors.
Tether is now the 17th largest holder of US Treasury securities, with holdings recently reported at around $135 billion, surpassing sovereign nations like South Korea. This represents a significant portion of the reserves backing USDT stablecoins circulating globally.
The US dollar has devalued about 14% against the euro in 2025, amidst economic uncertainty and controversial Fed proposals such as charging fees to holders of US Treasury bonds, which introduces risks to US debt holders including stablecoin issuers.
US government debt stands at some $38 trillion, with total debt including private and bank debt roughly double, highlighting substantial fiscal challenges. Stablecoins embedding this debt exposure increase overseas generalization of US debt risk as crypto adoption grows.
Despite the risks, Tether reported over $10 billion in net profits for the first nine months of 2025, maintaining excess reserves above its liabilities and actively growing USDT supply and ecosystem investment, balancing innovation with significant macroeconomic influences.
