By Hedy Bi and Jason Jiang | OKG Research
Trump’s return to White House has brought an unprecedented intertwining of politics and economics. This “Trump phenomenon” not only reflects his leadership style but also symbolizes a restructuring of economic interests and political power — a phenomenon referred to in economics as “political economy intertwining.” As the world’s largest economy and issuer of the global reserve currency, every policy shift in the U.S. serves as a bellwether for global capital flows. Looking ahead to 2025, the Trump administration’s acceptance of crypto may catalyze “Trumponomics” to ripple into the blockchain world, where the crypto market is transitioning from fringe innovation to a critical component of global finance.
As part of OKG Research’s “Trumponomics” series, this report dives into the core logic and future trends of this transformation. While the first article in the series explored Bitcoin’s impact on international finance, this installment focuses on the $36 trillion U.S. Treasury market, examining how blockchain technology and crypto tools could help solidify and expand the dollar’s dominance in the global financial system.
Coinbase CEO Brian Armstrong, speaking at the World Economic Forum in Davos, stated that forthcoming U.S. stablecoin regulations might require issuers to back their dollar-denominated stablecoins entirely with U.S. Treasuries. While we believe such a mandate is unlikely unless overcollateralization is required, Armstrong’s comments highlight the crypto market’s strong demand for U.S. Treasuries.
The U.S. Treasury market has grown at an astonishing pace: it took over 200 years to reach $1 trillion but just 40 years to grow from $1 trillion to $36 trillion. This exponential growth began with the Nixon administration’s 1971 decision to abandon the gold standard, enabling unlimited dollar printing and creating an uncontrollable debt problem.
While the U.S. debt market has ballooned, OKG Research observes that traditional investors, long accustomed to “footing the bill” for this $36 trillion market, are losing interest. Blockchain could be the new frontier for reinvigorating demand for U.S. Treasuries.
In 2025, the U.S. Treasury market faces a “hard mode” scenario, with nearly $3 trillion of Treasuries maturing, most of which are short-term. Meanwhile, in 2024, net issuance by the U.S. Treasury reached $26.7 trillion, a 28.5% year-over-year increase.
Under Trump’s leadership, his preference for loose monetary policy could further exacerbate market uncertainty. During his previous term, Trump frequently pressured the Federal Reserve to lower interest rates, viewing monetary policy as a key tool for stimulating the economy and boosting market confidence. If he succeeds in pushing for rate cuts, it could significantly lower Treasury yields, reduce their appeal to foreign investors, and increase depreciation pressure on the dollar, disrupting global foreign exchange reserves. Simultaneously, Trump’s growth-centric policies may drive higher fiscal spending, expanding deficits and straining Treasury supply.
On the demand side, foreign central banks appear less attracted to U.S. Treasuries. According to OKG Research, the growth rate of foreign central banks’ Treasury holdings is just 11%, far below the 28.5% increase in issuance. Among the top 20 foreign holders, only France (35.5%), Singapore (31%), Norway (40%), and Mexico (33%) increased their holdings faster than the issuance rate in 2024.
Moreover, some foreign central banks are actively reducing their holdings. Since April 2022, China’s Treasury holdings have consistently fallen below $1 trillion, dropping another $2.6 billion to $772 billion in September 2024. Japan, the largest foreign holder, reduced its holdings by $5.9 billion to $1.12 trillion during the same month. As diversification of foreign exchange reserves rises, demand for U.S. Treasuries is visibly weakening.
The combination of rapid debt growth and declining foreign demand poses dual challenges for the Treasury market, making a rise in risk premiums almost inevitable. If the market cannot absorb this debt effectively, larger-scale financial instability may ensue.
The crypto market may hold innovative solutions for absorbing this debt.
As one of the world’s safest assets, U.S. Treasuries are playing an increasingly pivotal role in the crypto market, primarily through stablecoins. Over 60% of on-chain activity involves stablecoins, which rely heavily on Treasuries as collateral.
Take USDC and USDT, the world’s largest stablecoins. Their issuance mechanisms require a 1:1 backing with high-quality assets, predominantly U.S. Treasuries. Currently, USDC’s Treasury holdings exceed $40 billion, while USDT’s surpass $100 billion. Together, stablecoins absorb roughly 3% of maturing short-term Treasuries, outpacing Germany and Mexico in the rankings of foreign Treasury holders.
Although the Trump administration could pursue a Bitcoin reserve strategy to attract international capital and boost Bitcoin prices, the direct fiscal benefits would be limited. Even if Bitcoin’s price rose to $200,000, reaching a $4 trillion market cap, purchasing 1 million Bitcoin today would yield only $100 billion in gains.
In contrast, stablecoins like USDT and USDC are creating direct demand for Treasuries. With the stablecoin market cap hitting a record $210 billion on January 22, 2025, OKG Research estimates that the market could surpass $400 billion by the end of the year. This growth would generate over $100 billion in new Treasury demand, potentially making stablecoins one of the top 10 Treasury holders globally.
If this trend continues, stablecoins could become the Treasury market’s most critical “invisible pillar,” with their direct demand for Treasuries far outweighing the indirect benefits of Bitcoin. Bitwise’s senior investment strategist has even suggested that stablecoins’ Treasury holdings could soon grow to 15%. A U.S. Treasury report also highlighted that stablecoin growth would structurally boost demand for short-term Treasuries.
As Trump’s economic stimulus policies take effect, stablecoins and their Treasury-backed reserves could represent a novel form of dollar expansion. Given the dollar’s status as the global reserve currency, Treasury issuance essentially exports U.S. inflation, indirectly making the world bear its debt burden while expanding the money supply. This dynamic reinforces the dollar’s dominance but also challenges other nations’ regulatory and tax systems.
Beyond serving as collateral for stablecoins, U.S. Treasuries are also the most popular asset class in the tokenization wave. According to RWA.xyz, the tokenized Treasury market grew from $769 million at the beginning of 2024 to $3.4 billion by early 2025, a fourfold increase. This rapid growth underscores both the potential of blockchain innovation and the market’s recognition of tokenized Treasuries.
Tokenization is rapidly integrating Treasuries into decentralized finance (DeFi). From serving as a low-risk yield-generating asset to facilitating staking and lending, tokenized Treasuries are bringing real-world stability to DeFi. Ondo’s tokenized short-term Treasury fund (OUSG) has even offered yields of up to 5.5%.
More importantly, tokenized Treasuries provide traditional investors with familiar assets, attracting institutional capital to DeFi and accelerating its maturity. Projects leveraging tokenized Treasuries are often seen as “low-risk innovations” and are more likely to gain regulatory approval.
For Treasuries, tokenization offers a new tool to ease debt pressures. By enabling seamless cross-border and cross-chain transactions, tokenization breaks down geographical barriers in traditional finance, opens new buyer markets, and enhances Treasuries’ global liquidity and appeal. This expanded on-chain liquidity could establish Treasuries as a cornerstone of global financial markets.
With expectations that Trump’s return will slow the Federal Reserve’s rate cuts in 2025, short-term Treasury yields may rise, reducing risk appetite and driving investors toward safer assets. In the near future, we can expect more Treasuries to migrate on-chain, with DeFi ecosystems leveraging tokenized Treasuries to reshape wealth management and investment strategies.
