In a recent series of posts on X, Schiff claimed that stablecoins don’t bring new liquidity into the Treasury market. Instead, he argues, they divert capital from traditional money markets, ultimately weakening demand for long-term government bonds—a key factor in setting mortgage rates.
According to Schiff, when investors park funds in stablecoins, the issuers typically buy short-term Treasury bills. But unlike money market funds, which pay investors the yield, stablecoin issuers keep the interest themselves. That dynamic, he warns, could reduce capital available for private lending and push long-term yields—and borrowing costs—higher.
He also pointed out that stablecoins can’t fund long-duration Treasuries, leading to an imbalance that could ripple through credit markets. “Money that goes into stablecoins to buy short-term Treasuries can’t be loaned out to private borrowers,” Schiff said, raising concerns about shrinking access to productive capital.
His view stands in contrast to bullish takes from financial giants like BlackRock, which recently highlighted stablecoins as a transformative force for modern markets. While stablecoins are increasingly embraced for their speed, transparency, and utility, Schiff insists their rapid growth could undercut financial stability—especially in the wake of pro-crypto legislation like the GENIUS Act signed by President Donald Trump.
As stablecoin adoption accelerates, regulators are now grappling with how these fiat-pegged assets fit into the broader financial system—and whether they’re a bridge to innovation or a growing systemic risk.
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