Arthur Hayes Says Bank Stablecoins to Unlock $6.8 Trillion in U.S. Debt Sales

Stablecoins could be the key to unlocking billions in liquidity and propping up the ailing US bond market, the former CEO of crypto exchange BitMEX, Arthur Hayes, has argued in his latest blog published July 3.

Hayes said the US government’s growing dependence on bond sales to fund its burgeoning debt is a high-risk strategy, which could result in destabilisation of the nation’s economy if new sources of liquidity aren’t unlocked soon. He said the US lacked enough buyers to purchase the US$5 trillion (AU$7.6 trillion) in bonds he expects it to try to sell this year, while also keeping 10-year bond yield rates below 5%.

The former BitMex CEO claims the 5% figure is important because historically when 10-year bond yields approach this level “bond market volatility measured by the MOVE Index spikes, and a financial crisis is not far behind.”

He’s not alone in warning of a looming ‘debt crisis’ fuelled by not enough buyers for US debt. The risk has increased thanks to Donald Trump’s ‘One Big Beautiful Bill’, according to the Washington Post, by adding an extra US$3.3 trillion (AU$5 trillion) to debt and further stressing the Treasuries market. 

Billionaire hedge-fund manager Ray Dalio predicted the bill could lead to big spending cuts,  “unimaginable” tax increases, or an increase in quantitative easing (printing money), which would further reduce the appeal of bonds. And, “what’s bad for bonds and US credit markets is bad for everyone because the US Treasury market is the backbone of all capital markets, which are the backbones of our economic and social conditions.”

Stablecoins Key to Supporting Treasuries Market: Hayes 

The answer to the dilemma of selling bonds while also stimulating financial markets, according to Hayes? Stablecoins.

Hayes argues that traditional ‘too-big-to-fail’ (TBTF) banks could issue their own stablecoins, unlocking up to US$6.8 trillion (AU$10.3t) in “inert” deposits and then re-use this money in the economy to purchase government debt instruments, such as bonds.

I believe the reason why the BBC [Hayes’ nickname for treasury Secretary Scott Bessent] is so pumped up about all things ‘Stablecoin’ is that by issuing a stablecoin, TBTF banks will unlock up to $6.8 trillion of T-bill purchasing power.

Arthur Hayes, former BitMEX CEO

Hayes added that “these inert deposits can then be re-leveraged within the fugazi fiat financial system to levitate markets.” Once TBTF banks convert their “regular deposits” to stablecoins, these deposits will be unlocked to buy bonds — essentially increasing the available liquidity by trillions of dollars.

Related: Bank for International Settlements Warns Stablecoins Fail Key Test

Why would this happen with stablecoins when it hasn’t happened with retail customer money banks already hold? Hayes said this shift would be driven largely by improvements to the customer experience and the huge reduction in compliance burden stablecoins would bring:

“Some readers might retort that JP Morgan can already buy T-bills with its regular deposits. My response is that stablecoins are the future because they create a better customer experience and allow TBTF banks to eliminate $20 billion of costs.”

Stablecoins Will Support The Existing System, Hayes Argues

In the end, Hayes says the passage of stablecoin legislation and the use of stablecoins by banks isn’t about financial freedom or increasing financial participation or any similar high minded ideals — it’s about pumping liquidity into the system to prop up bond markets:

The real stablecoin play isn’t betting on crusty FinTechs like Circle—it’s understanding that the US government just handed TBTF banks the launch keys to a multi-trillion-dollar liquidity bazooka disguised as “innovation.” This isn’t DeFi. This isn’t financial freedom. This is debt monetization dressed in Ethereum drag.

Arthur Hayes, former BitMEX CEO

Related: Arthur Hayes Unveils the State of Stablecoins in ‘Assume the Position’

Hayes suggests ignoring Circle and other stablecoin issuers and instead buying more Bitcoin. “Instead go long Bitcoin. Go long JPMorgan. Forget about Circle. The stablecoin Trojan horse is already inside the fortress, and when it opens, it’s not armed with libertarian dreams—it’s loaded with T-bill buying liquidity aimed at keeping equities inflated, deficits funded, and Boomers sedated.”

In typically colourful style, Hayes concludes “don’t sit on the sidelines waiting for Powell to bless the bull market. The BBC [Bessent] is done getting fluffed, and it’s time for him to soak the world with his liquidity juices.”