Key Takeaways
- Arthur Hayes says US banks could unlock $6.8 trillion in T-bill buying power via stablecoins.
- Stablecoins issued by traditional banks may enable dormant deposits to be recycled into US debt instruments.
- Hayes claims the main driver is debt monetization, not innovation or financial freedom.
Arthur Hayes, co-founder of BitMEX, believes that stablecoins issued by US banks could unlock up to $6.8 trillion in Treasury bill purchasing power, potentially transforming the financial system’s liquidity landscape.
Liquidity and debt markets
In a July 3 post, Hayes stated that the US Treasury, facing mounting deficits and the need to refinance existing debt, may struggle to find enough buyers for its bonds without pushing interest rates above 5%.
He argued that traditional banks could issue stablecoins backed by deposits, enabling vast sums currently dormant in the banking system to be recycled into US debt instruments.
Hayes explained:
“I believe the reason why the [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. These inert deposits can then be re-leveraged within the fugazi fiat financial system to levitate markets.”
Compliance automation and tokenized dollars
Hayes pointed to JPMorgan’s blockchain-based JPMD token as an example of how banks might automate compliance using on-chain data and AI.
He suggested AI-driven systems could cut compliance costs, estimated at $20 billion annually, and deliver instant regulatory reporting. In his words:
“An AI agent trained on the corpus of relevant compliance regulations can perfectly ensure that certain transactions are never approved. The AI can also instantaneously prepare any report requested by a regulator.”
Hayes also argued this model would allow banks to reclaim deposit dominance from fintechs while boosting profit margins by eliminating interest payments on tokenized deposits.
Debt monetization, not DeFi
Hayes concluded the US government’s interest in stablecoins is primarily about monetizing debt, not innovation or financial freedom.
He warned that the so-called stablecoin innovation is a mechanism for funneling liquidity into Treasury markets, stating:
“This isn’t DeFi. This isn’t financial freedom. This is debt monetization dressed in Ethereum drag.”
He advised investors to focus on assets like bitcoin in light of these shifts.
