Bessent Is Deluded About Stablecoins Funding the Deficit

"Even if demand for the tokens surges, it won’t magically produce dollars to buy more Treasuries.

Scott Bessent is wrong about a potential big new source of demand for US government debt — again. The Treasury Secretary expects stablecoins, the crypto tokens designed to keep a constant dollar value, to grow rapidly and gobble up huge volumes of public bonds. Both the explosion of issuance and the impact on Treasuries are overblown.

It’s the second time this year Bessent has gotten overexcited that rewriting financial rules will help meet the country’s vast and growing borrowing needs. In April, he said his loosening of constraints on the balance sheets of big banks would increase their appetite for holding Treasuries — but it will only help them trade bonds and lend more to hedge funds.

This time, he’s pumping up the prospects of rapid growth in stablecoins since the US passed the Guiding and Establishing National Innovation for U.S. Stablecoins act to give the tokens a firmer regulatory footing. Bessent told Congress in June he expects that the market could grow to $2 trillion from less than $300 billion now. He’s now telling Wall Street that a lot of this will flow straight into Treasury bills and bonds, according to the Financial Times.

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Teresa Ho, a senior strategist at JP Morgan Chase & Co., says it’s hard to believe that the market could grow to exceed even $1 trillion within a few years when the infrastructure and technology needed for broader adoption has yet to be built. She’s also doubtful that people will see them as a sensible place to put cash.

I personally have no idea why any normal person would sacrifice deposit insurance at a bank for a coin that pays no interest. But, more importantly, Ho points out that cash investors at the corporate and institutional level are inherently conservative — their stashes need to be safe and available. The old adage that no one in procurement ever got sacked for buying IBM products applies even more to finance managers: No one will get sacked for sticking with the Vanguard Federal Money Market Fund, for example."

https://www.bloomberg.com/opinion/articles/2025-08-22/tether-usdc-scott-bessent-is-deluded-about-stablecoins-funding-the-deficit?srnd=homepage-americas

Why would anyone trust anything from a former hedge fund manager is beyond me.