The "Beautiful Big Bill" Behind: A Financial Experiment Channeling the U.S. Debt Deluge into Stablecoins
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The "Beautiful Big Bill" Behind: A Financial Experiment Channeling the U.S. Debt Deluge into Stablecoins
A financial experiment born from a $36 trillion national debt crisis is attempting to transform the crypto world into the "buyer of last resort" for U.S. Treasuries, while the global monetary system is quietly being reshaped.
Navigating Web3 tides with focused insightsAuthor: Mask, W3C DAO
Inside the U.S. Capitol, a legislative proposal known as the "Beautiful Big Act" is being rapidly advanced. Deutsche Bank's latest report characterizes it as America's "Pennsylvania Plan" to address its massive debt—leveraging mandatory stablecoin purchases of U.S. Treasuries to integrate digital dollars into the national debt financing system.
This bill forms a policy one-two punch with the GENIUS Act, which already mandates that all dollar-pegged stablecoins must be fully backed by cash, U.S. government securities, or bank deposits. This marks a fundamental shift in stablecoin regulation. The legislation requires stablecoin issuers to hold reserves at a 1:1 ratio in USD or high-liquidity assets such as short-term U.S. Treasuries, bans algorithmic stablecoins, and establishes a dual-layer regulatory framework between federal and state authorities. Its goals are clear:
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Ease Treasury Pressure: Force stablecoin reserves into the Treasury market. According to forecasts from the U.S. Department of the Treasury, global stablecoin market capitalization could reach $2 trillion by 2028, with $1.6 trillion flowing into U.S. Treasuries—creating a new funding channel for America’s fiscal deficits.
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Consolidate Dollar Hegemony: Currently, 95% of stablecoins are pegged to the dollar. The bill reinforces the dollar’s “on-chain seigniorage” through a closed loop: USD → Stablecoins → Global Payments → Treasury Reinvestment.
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Drive Rate Cut Expectations: As Deutsche Bank notes, the act pressures the Federal Reserve to cut interest rates, reducing debt financing costs while weakening the dollar to boost U.S. export competitiveness.
Treasury Tsunami: Stablecoins as Policy Tools
The total U.S. federal debt has surpassed $36 trillion, with $9 trillion in principal and interest due by 2025. Facing this “debt dam,” the Trump administration urgently needs new financing channels. And stablecoins—once fringe financial innovations operating at the edge of regulation—have unexpectedly become Washington’s lifeline.
Signals from the Boston Money Market Fund Symposium suggest stablecoins are being cultivated as the Treasury market’s “new buyers.” Yie-Hsin Hung, CEO of State Street Global Advisors, stated bluntly: “Stablecoins are creating significant incremental demand for government bonds.”
The numbers speak volumes: today’s total stablecoin market cap stands at $256 billion, with roughly 80% allocated to U.S. T-bills or repurchase agreements—about $200 billion. Though less than 2% of the entire Treasury market, their growth rate commands attention from traditional institutions.
Citibank projects that by 2030, stablecoin market value could range between $1.6 and $3.7 trillion. At that point, issuers’ holdings of U.S. Treasuries would exceed $1.2 trillion—enough to rank among the largest holders globally.
Thus, stablecoins have evolved into instruments of dollar internationalization. Leading tokens like USDT and USDC already hold nearly $200 billion in U.S. Treasuries—equivalent to 0.5% of outstanding debt. If scaled to $2 trillion (with 80% in Treasuries), their holdings would surpass those of any single nation. This mechanism may:
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Distort Financial Markets: A surge in short-term Treasury demand lowers yields, steepens the yield curve, and undermines conventional monetary policy effectiveness.
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Weaken Emerging Market Capital Controls: Cross-border stablecoin flows bypass traditional banking systems, weakening exchange rate interventions (e.g., Sri Lanka’s 2022 crisis triggered by capital flight).
Legislative Scalpel: Regulatory Arbitrage as Financial Engineering
The “Beautiful Big Act” and the GENIUS Act form a precise policy tandem. The latter acts as a regulatory scaffold, forcing stablecoins to become Treasury “buyers of last resort”; the former offers incentives, completing the loop.
The core design exudes political sophistication: when users buy $1 worth of stablecoins, issuers must use that dollar to purchase U.S. Treasuries. This satisfies compliance while achieving fiscal objectives. Tether, the largest stablecoin issuer, net-purchased $33.1 billion in U.S. Treasuries in 2024 alone, becoming the world’s seventh-largest buyer.
The tiered regulatory regime reveals an intent to favor oligarchs: stablecoins exceeding $10 billion in market cap fall under direct federal oversight, while smaller players are relegated to state regulators. This accelerates market concentration—Tether (USDT) and Circle (USDC) now control over 70% of the market.
The bill also includes exclusionary clauses: non-dollar stablecoins are banned from circulation in the U.S. unless subject to equivalent regulation. This both strengthens dollar dominance and clears the path for USD1—a stablecoin backed by the Trump family—already secured with a $2 billion investment commitment from Abu Dhabi-based MGX.
Debt Transfer Chain: The Rescue Mission of Stablecoins
In the second half of 2025, the U.S. Treasury market will face a $1 trillion supply wave. To manage this flood, stablecoin issuers are expected to play a pivotal role. Mark Cabana, Head of Interest Rate Strategy at Bank of America, noted: “If the Treasury shifts toward short-term financing, the incremental demand from stablecoins could provide meaningful policy flexibility for the Treasury Secretary.”
The mechanism is elegantly designed:
- For every $1 of stablecoins issued, $1 in short-term Treasuries must be purchased—directly creating a financing channel
- Growing stablecoin demand translates into structural buying power, reducing uncertainty in government funding
- Issuers are compelled to continuously increase reserve holdings, forming a self-reinforcing demand cycle
Adam Ackermann, Portfolio Manager at fintech firm Paxos, revealed that several top-tier international banks are actively negotiating stablecoin partnerships, asking, “How can we launch a stablecoin solution within eight weeks?” Industry momentum has reached fever pitch.
Yet danger lies in the details: stablecoins primarily invest in short-term Treasuries, offering little relief to long-term supply-demand imbalances. Moreover, current stablecoin scale remains negligible compared to interest payments—global stablecoins total $232 billion, while annual U.S. debt servicing exceeds $1 trillion.
Dollar’s New Empire: The Rise of On-Chain Colonialism
The deeper strategic aim of the legislation is the digital upgrade of dollar hegemony. With 95% of global stablecoins pegged to the dollar, they are building a “shadow dollar network” outside the traditional banking system.
SMEs across Southeast Asia and Africa use USDT for cross-border remittances, bypassing SWIFT and cutting transaction costs by over 70%. This “informal dollarization” accelerates dollar penetration in emerging markets.
A more profound transformation is underway in international settlement paradigms:
- Traditional dollar clearing relies on interbank networks like SWIFT
- Stablecoins embed “on-chain dollars” directly into decentralized payment systems
- Dollar settlement capacity transcends traditional financial institutions, achieving a “digital hegemony” upgrade
The EU clearly perceives the threat. Its MiCA regulations restrict non-euro stablecoins from daily payments and impose issuance bans on large-scale foreign stablecoins. The European Central Bank is accelerating the digital euro—but progress remains slow.
Hong Kong takes a differentiated approach: establishing a stablecoin licensing regime while planning dual permits for OTC trading and custody services. The HKMA also intends to release operational guidelines for tokenizing real-world assets (RWA), promoting blockchain integration of bonds, real estate, and other traditional assets.
Risk Transmission Network: The Countdown to a Time Bomb
The legislation embeds three structural risks:
First: Treasury-Stablecoin Death Spiral. If users collectively redeem USDT, Tether must sell Treasuries for cash → Treasury prices crash → other stablecoin reserves devalue → systemic collapse ensues. In 2022, USDT briefly lost its peg during market panic; future events could trigger far larger disruptions given increased scale.
Second: Amplification of DeFi Risks. Once stablecoins enter DeFi ecosystems, they undergo layer-upon-layer leverage via liquidity mining, lending, and staking. Restaking enables assets to be repeatedly pledged across protocols, geometrically amplifying risk. A sharp drop in underlying asset values could trigger cascading liquidations.
Third: Loss of Monetary Policy Independence. Deutsche Bank warns the act will “pressure the Fed to cut rates.” The Trump administration gains indirect “money-printing power” through stablecoins, potentially undermining the Fed’s autonomy—Powell recently resisted political pressure, signaling no July rate cut is likely.
More troubling still, the U.S. debt-to-GDP ratio has exceeded 100%, increasing sovereign credit risk. Should Treasury yields remain inverted or default expectations emerge, stablecoins’ safe-haven status would be severely compromised.
New Global Chessboard: The On-Chain Reordering of Economic Order
In response to U.S. moves, three global blocs are emerging:
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Regulatory Convergence Bloc: Canada’s banking regulator announced readiness to oversee stablecoins, aligning with U.S. trends and fostering North American coordination. Coinbase will launch U.S.-style perpetual contracts in July, using stablecoins to settle funding rates.
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Innovation Defense Bloc: Hong Kong and Singapore diverge in regulatory approaches. Hong Kong adopts cautious tightening, positioning stablecoins as “virtual bank substitutes”; Singapore promotes a “stablecoin sandbox,” allowing experimental launches. This divergence risks regulatory arbitrage, weakening regional competitiveness.
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Alternative Solutions Bloc: Citizens in high-inflation countries increasingly treat stablecoins as “safe-haven assets,” eroding local currency usage and central bank policy efficacy. These nations may accelerate domestic stablecoins or multilateral CBDC bridge projects—but face tough trade-offs.
Meanwhile, the international system is shifting from unipolarity to a “hybrid architecture,” with three potential reform paths:
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Multilateral Currency Alliance (highest probability): Dollar, euro, and yuan form a tri-polar reserve system, supported by regional settlement mechanisms (e.g., ASEAN multilateral currency swap).
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Digital Currency Competition: 130 countries are developing central bank digital currencies (CBDCs). Digital RMB has piloted cross-border trade, potentially reshaping payment efficiency but facing sovereignty-sharing challenges.
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Extreme Fragmentation: Escalating geopolitical tensions could split the world into competing dollar, euro, and BRICS currency blocs, drastically raising global trade costs.
PayPal CEO Alex Chriss highlights a key bottleneck: “From a consumer standpoint, there’s currently no real incentive driving stablecoin adoption.” His company is rolling out reward programs to overcome this barrier, while decentralized exchanges like XBIT use smart contracts to solve trust issues.
Deutsche Bank predicts that once the “Beautiful Big Act” passes, the Fed will be forced to cut rates and the dollar will weaken significantly. By 2030, when stablecoins hold $1.2 trillion in U.S. Treasuries, the global financial system may have quietly undergone an on-chain restructuring—dollar hegemony embedded in code within every blockchain transaction, while risks spread through decentralized networks to every participant.
Technological innovation is never a neutral tool. When the dollar dons the cloak of blockchain, the old battles of financial order are being fought on a new battlefield!
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