The "Beautiful Act" is about to be passed, aiming to vigorously develop stablecoins and promote interest rate cuts by the Federal Reserve
A financial experiment born out of a $36 trillion treasury crisis is attempting to transform the crypto world into the "buyer" of U.S. debt.Author: Mask, W3C DAO
A financial experiment born out of a $36 trillion national debt crisis is attempting to transform the crypto world into the "buyer" of U.S. Treasury bonds, while the global monetary system is quietly being reshaped.
In the U.S. Capitol, legislation known as the "Beautiful Act" 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 stablecoins to purchase U.S. Treasury bonds, 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 dollar-pegged stablecoins must hold 100% cash, U.S. Treasury bonds, or bank deposits. This marks a fundamental shift in the regulation of stablecoins. The bill requires stablecoin issuers to hold reserves of $1 for every $1 in stablecoins issued, or high liquidity assets (such as short-term U.S. Treasury bonds), and prohibits algorithmic stablecoins while establishing a dual regulatory framework at both federal and state levels. Its goals are clear:
Alleviate pressure on U.S. Treasury bonds: Mandate that stablecoin reserve assets be directed towards the Treasury bond market. According to the U.S. Treasury's forecast, the global stablecoin market will reach $2 trillion by 2028, with $1.6 trillion flowing into U.S. Treasury bonds, providing new financing channels for the U.S. fiscal deficit.
Consolidate dollar hegemony: Currently, 95% of stablecoins are pegged to the dollar. The bill strengthens the dollar's "on-chain minting power" in the digital economy through a closed loop of "dollar → stablecoin → global payment → Treasury bond repatriation."
Promote interest rate cut expectations: The Deutsche Bank report points out that the bill pressures the Federal Reserve to cut interest rates to lower the financing costs of U.S. Treasury bonds while guiding the dollar to weaken, enhancing U.S. export competitiveness.
U.S. Treasury Bond Logjam, Stablecoins as Policy Tools
The total U.S. federal debt has surpassed $36 trillion, with principal and interest repayments reaching $9 trillion by 2025. Faced with this "debt logjam," the Trump administration urgently needs to open new financing channels. Stablecoins, once floating on the edge of regulation, unexpectedly became the White House's lifeline.
Signals from the Boston Money Market Fund Symposium indicate that stablecoins are being cultivated as "new buyers" in the Treasury bond market. Yie-Hsin Hung, CEO of State Street Global Advisors, stated, "Stablecoins are creating substantial new demand for the Treasury bond market."
The numbers speak for themselves: the current total market value of stablecoins is $256 billion, with approximately 80% allocated to U.S. Treasury bills or repurchase agreements, amounting to about $200 billion. Although this accounts for less than 2% of the Treasury bond 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 amount of Treasury bonds held by issuers will exceed $1.2 trillion. This scale is enough to place them among the largest holders of U.S. Treasury bonds.
Thus, stablecoins have become a new tool for the internationalization of the dollar. For instance, leading stablecoins like USDT and USDC hold nearly $200 billion in Treasury bonds, equivalent to 0.5% of U.S. national debt; if the scale expands to $2 trillion (with 80% allocated to Treasury bonds), the holdings will surpass those of any single country. This mechanism may:
Distort financial markets: A surge in demand for short-term Treasury bonds drives down yields, exacerbating the steepening of the yield curve and weakening the effectiveness of traditional monetary policy.
Undermine capital controls in emerging markets: The cross-border flow of stablecoins bypasses traditional banking systems, weakening the ability to intervene in exchange rates (as seen in Sri Lanka's crisis due to capital flight in 2022).
Bill as a Scalpel, Financial Engineering of Regulatory Arbitrage
The "Beautiful Act" and the "GENIUS Act" form a precise policy combination. The latter serves as a regulatory framework, mandating stablecoins to become the "buyers" of 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 stablecoins for $1, issuers must use that $1 to buy Treasury bonds. This satisfies compliance requirements while achieving fiscal financing goals. Tether, as the largest stablecoin issuer, is projected to net purchase $33.1 billion in U.S. Treasury bonds in 2024, rising to become the seventh-largest buyer of U.S. Treasury bonds globally.
The tiered regulatory system further reveals intentions to support oligopolies: stablecoins with a market value exceeding $10 billion are directly regulated by the federal government, while smaller players are handed over to state-level institutions. This design accelerates market concentration, with Tether (USDT) and Circle (USDC) already holding over 70% of the market share.
The bill also includes exclusivity clauses: it prohibits non-dollar stablecoins from circulating in the U.S. unless they accept equivalent regulation. This not only consolidates dollar hegemony but also clears obstacles for the USD1 stablecoin supported by the Trump family—this coin has already received a $2 billion investment commitment from Abu Dhabi investment firm MGX.
Debt Transfer Chain, The Rescue Mission of Stablecoins
In the second half of 2025, the U.S. Treasury bond market will face a $1 trillion increase in supply. In light of this flood, stablecoin issuers are expected to play a crucial role. Mark Cabana, head of interest rate strategy at Bank of America, noted, "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 remarkably clever:
For every $1 stablecoin issued, $1 in short-term Treasury bonds must be purchased, directly creating a financing channel.
The growth in stablecoin demand translates into institutional purchasing power, reducing uncertainty in government financing.
Issuers are compelled to continuously increase their reserve assets, forming a self-reinforcing demand loop.
Adam Ackermann, head of the investment portfolio at fintech company Paxos, revealed that several top international banks are negotiating stablecoin collaborations, inquiring about "how to launch a stablecoin solution within eight weeks." The industry's heat has reached its peak.
However, the devil is in the details: stablecoins primarily peg to short-term Treasury bonds, providing no substantial help to the supply-demand imbalance of long-term Treasury bonds. Moreover, the current scale of stablecoins remains insignificant compared to U.S. Treasury interest payments—global stablecoin total size is $232 billion, while annual interest on U.S. Treasury bonds exceeds $1 trillion.
New Dollar Hegemony, The Rise of 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, constructing a "shadow dollar network" outside the traditional banking system.
Small and medium-sized enterprises in Southeast Asia and Africa use USDT for cross-border remittances, bypassing the SWIFT system, reducing transaction costs by over 70%. This "informal dollarization" accelerates the dollar's penetration into emerging markets.
The more profound impact is the paradigm revolution of the international clearing system:
Traditional dollar clearing relies on interbank networks like SWIFT.
Stablecoins embed themselves as "on-chain dollars" in various distributed payment systems.
The dollar's settlement capability breaks through the boundaries of traditional financial institutions, achieving an upgrade in "digital hegemony."
The European Union is clearly aware of the threat. Its MiCA regulation restricts the daily payment functions of non-euro stablecoins and imposes issuance bans on large-scale stablecoins. The European Central Bank is accelerating the promotion of the digital euro, but progress is slow.
Hong Kong, on the other hand, 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 custody services. The Monetary Authority also plans to release guidelines for the tokenization of real-world assets (RWA), promoting the on-chain integration of traditional assets like bonds and real estate.
Risk Transmission Network, The Countdown of a Time Bomb
The bill embeds three structural risks:
First: The death spiral of Treasury bonds and stablecoins. If users collectively redeem USDT, Tether must sell Treasury bonds for cash → Treasury bond prices plummet → other stablecoin reserves devalue → a total collapse. In 2022, USDT briefly lost its peg due to market panic; similar events may impact the Treasury bond market as the scale expands.
Second: The amplification of risks in decentralized finance. Once stablecoins flow into the DeFi ecosystem, they become layered and leveraged through liquidity mining, lending, and staking. The restaking mechanism allows assets to be repeatedly staked across different protocols, geometrically amplifying risks. If the value of underlying assets plummets, it could trigger a chain of liquidations.
Third: The loss of monetary policy independence. The Deutsche Bank report directly points out that the bill will "pressure the Federal Reserve to cut interest rates." The Trump administration indirectly gains "money printing power" through stablecoins, potentially undermining the independence of the Federal Reserve—Powell has recently rejected political pressure, suggesting that a rate cut in July is unlikely.
More troubling is that the U.S. debt-to-GDP ratio has exceeded 100%, and the credit risk of U.S. Treasury bonds is rising. If Treasury bond yields continue to invert or expectations of default arise, the safe-haven attribute of stablecoins will be in jeopardy.
A New Global Chessboard, On-Chain Reconstruction of Economic Order
In response to U.S. actions, three major camps are forming globally:
Regulatory Integration Camp: Canadian banking regulators have announced they are ready to regulate stablecoins, with a framework in development. This echoes U.S. regulatory trends, forming a North American collaborative stance. Coinbase plans to launch U.S. perpetual contracts in July, using stablecoins to settle funding rates.
Innovation Defense Camp: Hong Kong and Singapore show regulatory path divergence. Hong Kong adopts a cautiously tightening approach, positioning stablecoins as "virtual bank alternatives"; Singapore implements a "stablecoin sandbox," allowing experimental issuance. This difference may trigger regulatory arbitrage, weakening overall competitiveness in Asia.
Alternative Solutions Camp: Citizens in high-inflation countries view stablecoins as "safe-haven assets," undermining local currency circulation and the effectiveness of central bank monetary policy. These countries may accelerate the development of local stablecoins or multilateral digital currency bridge projects but face severe trade challenges.
Moreover, the international system will also undergo changes: from unipolar to a "hybrid architecture," current reform proposals present three paths:
Diversified Currency Alliance (most probable): The dollar, euro, and renminbi form a tri-polar reserve currency system, supplemented by regional settlement systems (such as ASEAN multilateral currency swaps).
Digital Currency Competition: 130 countries are developing central bank digital currencies (CBDCs), with the digital renminbi already piloting cross-border trade, potentially reshaping payment efficiency but facing challenges of sovereignty transfer.
Extreme Fragmentation: If geopolitical conflicts escalate, it may lead to fragmented dollar, euro, and BRICS currency camps, significantly increasing 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 as the "Beautiful Act" is implemented, the Federal Reserve will be forced to cut interest rates, and the dollar will significantly weaken. 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—the dollar hegemony embedded in every transaction on the blockchain, while risks spread to every participant through decentralized networks.
Technological innovation is never a neutral tool; when the dollar dons the cloak of blockchain, the game of the old order is being played out on a new battlefield!
