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Here’s a problem that doesn’t get enough attention: the world’s most important bond market is slowly losing its biggest customers. Foreign governments used to hold roughly half of all outstanding US Treasury debt. That share has dropped to under 30%. United Overseas Bank thinks the private sector, specifically the stablecoin and tokenization crowd, is already doing it.
UOB, one of Singapore’s largest banks, has been making the case that regulated stablecoins and tokenized Treasury products are creating a new, reliable class of buyers for short-term US government debt. Stablecoin issuers need safe, liquid assets to back their tokens, and Treasury bills fit the bill perfectly.
The quiet shift in Treasury demand
Foreign official holders, think central banks and sovereign wealth funds, held approximately 50% of total outstanding US Treasury debt back in 2012. By 2023, that figure had slipped below 30%.
Into that gap have stepped two groups: money market funds and stablecoin issuers. Both need mountains of short-duration, high-quality collateral. Both have been buying Treasury bills in size.
UOB’s research, particularly its work on “Digital Assets, Stablecoins in Regulated Finance,” frames this not as a temporary quirk but as a durable trend. As the stablecoin market grows, so does its appetite for Treasurys.
The tokenized Treasury market has expanded notably over the past year, with multiple funds from major financial players entering the space. These products take traditional Treasury exposure and wrap it in blockchain-native formats, making it accessible to a different set of investors and usable as collateral in decentralized finance.
UOB’s role in programmable money
UOB has been actively participating in the Monetary Authority of Singapore’s Project Orchid initiative, which explores programmable money and asset tokenization.
Kah Kit Yip, UOB’s Head of Blockchain and Digital Assets, has spoken publicly about the bank’s evolving approach to stablecoins, central bank digital currencies, and tokenized deposits for capital market operations.
The bank has reported that private entities, including other banks, are increasingly involved in issuing regulated stablecoins and tokenized assets as of 2023.
What this means for investors
For the Treasury market itself: a growing base of private sector buyers, structurally incentivized to hold short-term government debt, provides a cushion against the ongoing decline in foreign official holdings.
For the crypto and digital asset space: the push toward regulated stablecoins backed by Treasurys creates a class of digital instruments with real yield characteristics and transparent collateral, a meaningful upgrade over the opacity that characterized earlier stablecoin models.
There are risks worth watching. Regulatory frameworks for stablecoins remain fragmented across jurisdictions. A major stablecoin depegging event could trigger forced selling of Treasury reserves. And the concentration of Treasury holdings among a handful of large stablecoin issuers introduces a different kind of systemic risk.
Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
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