Arthur Hayes: Stablecoins May Soon Rescue the U.S. Debt Market

In his July 3 Substack post , Hayes argued that Treasury Secretary Scott Bessent faces the “near-impossible” challenge of selling over $5 trillion in bonds this year to cover budget deficits and refinance maturing debt, all while preventing the 10-year yield from breaching the psychologically important 5% mark.

With the Federal Reserve now prioritizing inflation control over bond purchases, the Treasury has been forced to seek alternative buyers. According to Hayes, large U.S. banks are already stepping in, but the real breakthrough may come from the stablecoin sector.

He highlighted JP Morgan’s JPMD token, set to operate on Coinbase’s Base network, as a pivotal development. By converting customer deposits into tokenized dollars, banks could automate compliance and back-office operations, potentially saving up to $20 billion annually. These freed-up funds, Hayes predicts, would then be recycled into Treasury bills (T-bills), which carry minimal interest rate risk and offer yields close to the Federal Funds rate.

Hayes estimates that tokenized bank deposits could unlock as much as $6.8 trillion in demand for T-bills. He also pointed to a Republican-led proposal aiming to end the Federal Reserve’s interest payments on bank reserves, which could push banks to redeploy up to $3.3 trillion in idle funds into Treasuries instead.

He describes this mechanism as a form of stealth quantitative easing – not by the Fed printing new money, but through private banks issuing stablecoins, buying T-bills, increasing dollar supply, and suppressing yields in the process. For crypto investors, Hayes believes this environment of rising liquidity and falling real yields will be highly supportive of risk assets such as Bitcoin.

Additionally, in April, Hayes predicted that U.S. Treasury bond buybacks could significantly boost market liquidity, potentially driving Bitcoin to as high as $110,000, with a possibility of reaching $200,000.