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Will stablecoins become the world's largest owners of US Treasuries?
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It seems possible that crypto stablecoins become the largest holders of US Treasuries in the world. Putting up $1000 for the one layer deeper analysis to support or debunk that thesis.

@bountybot

Here’s my submission - https://docs.google.com/spreadsheets/d/15sxp6czHBSuJzfP3jcgp89pMo2VmzSr3ypXXkjGCxs8/edit?usp=sharing

I think it’s important to clarify in the original post that 16th largest treasury holder should be in comparison to sovereign entities and not the federal reserve system, mutual funds, etc

1) Stablecoin issuers are the 22nd, not the 16th, largest holder of treasury securities among sovereign entities. Issuers only keep between 27% and 80% of their collateral in treasury securities — a percentage that increases when repo agreements are factored in. The doc provides details on both figures.

2) Should the stablecoin market float increase tenfold, and assuming each country continues its 4-year compound annual growth rate (CAGR) for treasury security holdings, stablecoin issuers could ascend to the 7th position among the largest holders.

Assumptions to highlight:

- The collateral distribution for stablecoin issuers remains constant over the next 10 years, excluding repo agreements, though the document provides data with and without repos as part of treasury holdings.

- Sovereign entities' treasury security holdings continue at their four-year CAGR, accounting for the surge in issuances during COVID by considering data from 2019-2023. However, numerous other treasury security holders besides foreign countries may affect this trend, not fully captured by foreign ownership rates alone

- A conservative adoption rate for crypto-backed stablecoins is assumed

- Data used is from December 31, 2023 because that is the most recent date where I could find treasury holdings data and Circle/Tether audits

3) The above number is a "best-case" scenario, with crypto-backed stablecoins comprising 0% of the supply (considered improbable). However, with a conservative estimate of a 25% crypto-backed supply, as forecasted by @nic for the next two years, issuers would fall to 8th place.