"Beautiful Grand Proposal": The United States' Financial Reconstruction Experiment of Bail-out National Debt with Stablecoins

Author: Mask

Original title: The United States' "Beautiful Law" 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 last resort" for U.S. bonds, while the global monetary system is quietly being reshaped.

Inside 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 cope with its massive debt — by mandating the purchase of U.S. Treasuries with stablecoins, 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 USD stablecoins must be 100% backed by cash, U.S. Treasuries, or bank deposits. It marks a fundamental shift in the regulation of stablecoins. The bill requires stablecoin issuers to hold reserves in a 1:1 ratio with USD or highly liquid assets (such as short-term U.S. Treasuries) and prohibits algorithmic stablecoins, while establishing a dual regulatory framework at the federal and state levels. Its goals are clear:

• Alleviating pressure on US Treasuries: Mandatory stablecoin reserve assets are directed towards the US Treasury market. According to forecasts by the US Department of the Treasury, the global stablecoin market value will reach $2 trillion by 2028, with $1.6 trillion flowing into US Treasuries, providing a new financing channel for the US fiscal deficit.

• Consolidation of Dollar Hegemony: Currently, 95% of stablecoins are pegged to the dollar. The bill establishes a closed loop of "dollar → stablecoin → global payments → return of U.S. debt," reinforcing the dollar's "on-chain minting power" in the digital economy.

• Promote interest rate cut expectations: Deutsche Bank's report points out that the passage of the bill exerts pressure on the Federal Reserve to cut interest rates in order to lower U.S. debt financing costs, while also guiding the dollar to weaken to enhance the competitiveness of U.S. exports.

US Treasury Bond Logjam, Stablecoins Become a Policy Tool

The total federal debt of the United States has exceeded $36 trillion, with principal and interest payments due in 2025 amounting to $9 trillion. In the face of this "debt dam", the Trump administration urgently needs to find new financing channels. Surprisingly, stablecoins, which were once on the fringes of regulation, have become a lifeline for the White House.

According to signals from the Boston Money Market Fund Seminar, stablecoins are being nurtured as the "new buyers" in the U.S. Treasury market. Yie-Hsin Hung, CEO of State Street Global Advisors, stated: "Stablecoins are creating significant new demand for the Treasury market."

Numbers speak for themselves: The current total market capitalization of stablecoins is 256 billion USD, of which about 80% is allocated to U.S. Treasury bills or repurchase agreements, amounting to approximately 200 billion USD. Although it accounts for less than 2% of the U.S. bond market, its growth rate has attracted the attention of traditional financial institutions.

Citibank predicts that by 2030, the market value of stablecoins will reach between 1.6 and 3.7 trillion USD, at which point the scale of U.S. Treasury securities held by issuers will exceed 1.2 trillion USD. This volume is sufficient to rank among the largest holders of U.S. Treasuries.

Thus, stablecoins have become a new tool for the internationalization of the US dollar. For example, leading stablecoins like USDT and USDC hold nearly $200 billion in US Treasury bonds, accounting for 0.5% of US government debt. If the scale expands to $2 trillion (with 80% allocated to US Treasury bonds), the holdings will exceed that of any single country. This mechanism may:

• Distorted financial markets: The surge in short-term U.S. Treasury demand has suppressed yields, exacerbating the steepening of the yield curve and weakening the effectiveness of traditional monetary policy.

• Weaken capital controls in emerging markets: Stablecoin cross-border flows bypass traditional banking systems, weakening the ability to intervene in exchange rates (e.g., the crisis in Sri Lanka in 2022 due to capital flight).

The Anatomy of the Bill: Financial Engineering for Regulatory Arbitrage

The "Beautiful Big Act" and the "GENIUS Act" constitute a sophisticated policy combination. The latter serves as a regulatory framework, mandating stablecoins to become the "backstop" for U.S. Treasury bonds; the former provides issuance incentives, forming a complete closed loop.

The core design of the bill is full of political wisdom: when a user purchases a stablecoin for 1 dollar, the issuer must use that 1 dollar to buy U.S. Treasury bonds. This meets compliance requirements while achieving fiscal financing goals. Tether, as the largest stablecoin issuer, net purchased 33.1 billion dollars in U.S. Treasury bonds in 2024, ranking as the seventh largest buyer of U.S. Treasuries in the world.

The tiered regulatory system further reveals the intention to support oligopolies: stablecoins with a market capitalization of over $10 billion are directly regulated by the federal government, while smaller players are handed over to state-level agencies. This design accelerates market concentration, with Tether (USDT) and Circle (USDC) already occupying over 70% of the market share.

The bill also includes exclusivity clauses: it prohibits non-U.S. dollar stablecoins from circulating in the United States unless they are subject to equivalent regulation. This both reinforces the dominance of the dollar and clears the way for the USD1 stablecoin supported by the Trump family — this coin has already received a $2 billion investment commitment from the Abu Dhabi investment company MGX.

Debt Shifting Chain, the Stabilizing Mission of Stablecoins

In the second half of 2025, the U.S. Treasury market is expected to see a supply increase of $1 trillion. In the face of this surge, stablecoin issuers are expected to play a significant role. Mark Cabana, head of interest rate strategy at Bank of America, pointed out: "If the Treasury shifts to short-term debt financing, the additional demand brought by stablecoins will provide the Treasury Secretary with policy space."

The mechanism design is exquisite:

• For every 1 USD stablecoin issued, 1 USD in short-term U.S. Treasury bonds must be purchased, directly creating a financing channel.

• The growing demand for stablecoins translates into institutional purchasing power, reducing the uncertainty of government financing.

• Issuers are forced to continuously increase their reserve assets, creating a self-reinforcing demand cycle.

Adam Ackermann, the portfolio manager of the fintech company Paxos, revealed that several top international banks are discussing cooperation on stablecoins, inquiring about "how to launch a stablecoin solution within eight weeks." The industry's heat has reached its peak.

But the devil is in the details: stablecoins are mainly anchored to short-term U.S. Treasury bonds, providing no substantial help to the supply and demand contradiction of long-term U.S. Treasury bonds. Moreover, the current scale of stablecoins is still insignificant compared to U.S. Treasury interest expenses—global stablecoin total scale is $232 billion, while annual interest on U.S. Treasuries exceeds $1 trillion.

The New Dollar Hegemony, The Rise of On-Chain Colonialism

The deep 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, Africa, and other regions are using USDT for cross-border remittances, bypassing the SWIFT system, reducing transaction costs by more than 70%. This "informal dollarization" accelerates the penetration of the dollar in emerging markets.

The deeper impact lies in the paradigm revolution of the international clearing system:

• Traditional USD settlement relies on interbank networks such as SWIFT.

• Stablecoins are embedded in various distributed payment systems in the form of "on-chain dollars".

• The dollar settlement capability breaks through the boundaries of traditional financial institutions, achieving an upgrade in "digital hegemony".

The EU is clearly aware of the threats. Its MiCA regulation restricts the daily payment function of non-euro stablecoins and imposes a ban on the issuance of large-scale stablecoins. The European Central Bank is accelerating the development of the digital euro, but progress is slow.

Hong Kong adopts a differentiated strategy: while establishing a licensing system for stablecoins, it plans to launch a dual licensing system for over-the-counter trading and custody services. The Monetary Authority also plans to publish guidelines for the tokenization of real-world assets (RWA) to promote the on-chain of traditional assets such as bonds and real estate.

Risk Transmission Network, Countdown of a Time Bomb

The bill lays down three structural risks:

First Layer: US Treasury - Stablecoin Death Spiral. If users collectively redeem USDT, Tether must sell US Treasuries for cash → US Treasury prices plummet → other stablecoin reserves depreciate → complete collapse. In 2022, USDT briefly lost its peg due to market panic, and similar events in the future may impact the US Treasury market as the scale expands.

Layer Two: The amplification of risks in decentralized finance. After stablecoins flow into the DeFi ecosystem, they become leveraged through liquidity mining, lending, and staking operations. The Restaking mechanism allows assets to be repeatedly staked across different protocols, leading to a geometric amplification of risks. Once the value of the underlying assets plummets, it can trigger a chain reaction of liquidations.

Third Layer: Loss of independence in monetary policy. The Deutsche Bank report points out that the bill will "pressure the Federal Reserve to cut interest rates." The Trump administration indirectly obtained "printing rights" through stablecoins, which may undermine 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 surpassed 100%, and the credit risk of U.S. Treasury bonds is rising. If U.S. Treasury yields continue to be inverted or default expectations arise, the safe-haven properties of stablecoins will be in jeopardy.

A New Global Chessboard, On-Chain Reconstruction of Economic Order

In response to American actions, the world is forming three major camps:

• Alternative camp: In countries with high inflation, the public views stablecoins as "safe-haven assets," undermining the circulation of local currency and the effectiveness of central bank monetary policy. These countries may accelerate the development of local stablecoins or multilateral digital currency bridge projects, but they face severe trade challenges.

And the international system will also undergo changes: from unipolar to a "hybrid architecture", the current reform plan presents three pathways:

• Extreme fragmentation: If geopolitical conflicts escalate, it may lead to a split among the US dollar, euro, and BRICS currency blocs, resulting in a surge in global trade costs.

PayPal CEO Alex Chriss pointed out a key bottleneck: "From the consumer's perspective, there is currently no real incentive to drive the adoption of stablecoins." The company is launching a rewards mechanism to tackle the adoption issue, while decentralized exchanges like XBIT are addressing 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 US Treasury bonds, the global financial system may have quietly completed an on-chain reconstruction—where dollar hegemony is embedded in every transaction on the blockchain in the form of code, and risks spread to every participant through decentralized networks.

Technological innovation has never been a neutral tool. When the dollar dons the cloak of blockchain, the game of the old order is playing out on a new battlefield!