In the imagination of Washington, the CLARITY Act is packaged as a "win-win" legislative attempt: on one hand, it provides a clear and predictable regulatory framework for the digital asset market and crypto dollars, ending years of gray areas regarding "what can be issued, how to issue, and who is in charge"; on the other hand, in the current context where marginal buyers of U.S. debt are becoming increasingly thin, it opens a new funding channel for the Treasury. Around this bill, the industry and some policymakers have formed a seemingly coherent narrative: as long as the rules are clear, platforms like Coinbase and issuers like Circle and Tether can, under licensing and reserve requirements, steadily convert global users' preferences for digital dollars into structural demand for U.S. Treasury bonds—Coinbase's Chief Policy Officer Faryar Shirzad even summarized this logic chain simply as "digital dollar demand → U.S. Treasury demand." But recently, Lawrence Lepard poured cold water on this notion: as reported, he believes that even if the CLARITY Act can secure 60 votes in the Senate, symbolizing bipartisan consensus, and passes through all procedures to enter the implementation stage, it will not change a cold arithmetic reality—the current total market value of dollar-pegged crypto tokens is only about $255 billion, while the U.S. Treasury needs to roll over more than $8 trillion in debt every year. Even if all $255 billion is applied to U.S. Treasury bonds without discount, it can only cover about 3% of the annual financing gap. This magnitude disparity indicates that the "market-saving" function attributed to crypto dollars has had an unrealistic element from the very beginning.

Washington's bet: Using crypto tokens to underpin Treasury bonds

In the context of declining foreign ownership and the Treasury being forced to roll over more than $8 trillion in debt annually, the Washington policy circle quickly seized upon a narrative that seemed to align with the trend: since global funds are still seeking dollar assets, albeit on-chain, why not redirect this overseas preference for "digital dollars" back to U.S. Treasury's order book? Coinbase's Chief Policy Officer Faryar Shirzad articulated this logic most plainly—dollar-pegged crypto tokens can transform overseas demand for digital dollars into demand for U.S. Treasury bonds; as long as these tokens are integrated into a compliant framework, the corresponding reserves have reasons to be more allocated to short-term Treasury bonds.

Surrounding this narrative, the CLARITY Act is packaged as much more than just a piece of technology industry legislation; it is seen as a geopolitical financial tool that adds bricks to the financial hegemony of the dollar. Supporters intentionally bind regulatory clarity directly to Treasury demand: clearer licensing and registration paths, stricter reserve safety, liquidity and transparency requirements should result in more “legitimate” issuers who use short-term Treasury bonds and cash equivalents as underlying assets and lock their ever-growing token reserves into the U.S. Treasury market. In this vision, CLARITY not only delineates a compliant runway for the crypto industry but also tries to use regulations to fix the marginal global demand for digital dollars into institutional new bids for U.S. Treasury bonds.

$255 billion vs. $8 trillion: 3% cold water

Bringing the narrative back to arithmetic, the picture becomes less inspiring. The current total market value of dollar-pegged crypto tokens is approximately $255 billion, even lower than the roughly $263 billion level in January of this year; on the same side, the U.S. Treasury needs to roll over more than $8 trillion in debt annually. Putting them on the same table reveals a brutal ratio: even supposing all $255 billion behind these reserves is used to buy U.S. Treasury bonds without discount, it would only cover about 3% of the annual rollover demand. This is not a scale that should be expected from a "new major buyer"; it's more like a few buckets of sand thrown into a raging flood, offering a negligible alleviation to the overall financing gap.

Lepard's reasoning starts from this arithmetic problem. In his view, even if the CLARITY Act really manages to secure 60 votes in the Senate to draw a compliant fast track for dollar-pegged crypto tokens and guide more overseas interest in digital dollars, the upper limit that can ultimately be converted into Treasury bond purchases is still firmly locked by the $255 billion scale. The token reserve scale roughly corresponds to the circulation scale and is constrained by regulatory requirements such as licensing, reserve safety, and transparency. Even in the most optimistic scenarios, it will be difficult to rewrite the 3% ratio into a figure that could turn the situation around within a foreseeable time frame. Therefore, the notion that "crypto dollars will become the savior of U.S. Treasury bonds" appears to Lepard more as a political narrative rather than a realistic plan to genuinely reshape the demand structure for Treasury bonds.

Declining foreign funds and increasing gap in U.S. debt

For a period following the financial crisis, foreign entities were one of the most important "natural buyers" of U.S. debt, holding about 57%. However, in subsequent years, amid the simultaneous expansion of total U.S. federal debt and the annual rollover issuance exceeding $8 trillion, this share has steadily declined. According to a single source's estimates, it will drop to about 32% by around 2025. As nominal debt continues to pile up while the foreign buyer share shrinks, the U.S. Treasury market is quietly shifting from "everyone in the world buys American safe assets" to the structural quandary of "who will take over the remaining majority." Consequently, the question of "who will take over U.S. Treasury bonds" has transitioned from academic debate to a real concern in fiscal and market dimensions.

It is precisely within the context of declining foreign funds that the notion of dollar-pegged crypto tokens as the "new marginal buyers" appears particularly enticing: they can circulate on-chain around the clock, and their reserves are configured according to rules, with cash, bank deposits and U.S. Treasury bonds seen as a technical shell that can directly convert global preferences for digital dollars into demand for U.S. Treasury bonds. Coinbase's Chief Policy Officer Faryar Shirzad has publicly emphasized this logical chain, providing industry discourse support for the "digital dollar demand → U.S. Treasury demand" narrative. During the decline from 57% to 32% in foreign ownership, this narrative provides policymakers with a seemingly ready-made answer: even if the scale is limited, efforts should be made to develop the crypto industry into a new piece of the buyer structure for U.S. Treasury bonds.

Licensing, reserves, and limits: How far can issuers go?

To genuinely turn "digital dollar demand" into "U.S. Treasury demand," the first threshold is not market imagination but licensing. Mainstream issuers of dollar-pegged crypto tokens, like Circle and Tether, must include themselves in a regulatory framework in their respective jurisdictions to operate, obtain licenses, or complete registrations, and ensure the security, liquidity, and transparency of their reserves as required. This directly limits their asset allocation paths: reserves must be placed in highly liquid, low credit risk assets, making cash, bank deposits, and short-term U.S. Treasury bonds naturally "qualified" underlying assets to report to regulators. In contrast, longer duration bonds with greater volatility will intentionally be reduced to avoid triggering asset depreciation or compliance risks during redemption peaks.

Legislative attempts like the CLARITY Act are expected to further clarify which institutions can issue dollar-pegged crypto tokens and under what conditions they can hold corresponding U.S. Treasury reserves. From a regulatory perspective, this may expand the pool of licensed issuers and potentially strengthen the principle of "safety and liquidity first" within the text, indirectly locking the reserve duration to the short end. However, regardless of how the rules are designed, the token issuance model itself has already established a hard boundary—the reserve scale roughly corresponds to the scale of circulating tokens. The current total market value of dollar-pegged crypto tokens is about $255 billion, and even if all of it were to be directed to U.S. Treasury bonds under the most permissive regulatory scenarios, it would only cover about 3% of the more than $8 trillion in annual U.S. Treasury financing needs, and in reality, a portion must be reserved for cash and deposit buffers. Within this structure, even if the CLARITY Act can indeed clarify the rules, licensing constraints and asset scale together determine that the amount of U.S. Treasury bonds that crypto dollars can purchase has a ceiling rather than being an endless pit.

When regulatory ambitions meet arithmetic: Who is the ultimate buyer?

Arithmetic clearly delineates the boundaries of the story: Lepard has pointed out that even if the CLARITY Act can secure 60 votes in the Senate, it won't change the overall structure of the U.S. Treasury market, as the issue is not whether the text is "friendly" but the size difference between $255 billion and $8 trillion. The CLARITY Act is more akin to a foundational infrastructure providing regulatory clarity for digital assets and related tokens. What it can do is push issuance, custody, and trading from gray areas toward licensing, integrating issuers like Circle and Tether, mainstream platforms, and end users into a more systematic compliance framework, allowing them to hold and use "digital dollars" backed by U.S. Treasury bonds in a more predictable and institutionalized manner. In the context of foreign ownership sliding from approximately 57% after the financial crisis to about 32% by around 2025, while total federal debt continues to expand, it is the marginal buyer structure of U.S. Treasury bonds that truly needs to be reshaped: domestic institutional investors, money market funds, the banking system, alongside new entities including issuers of crypto dollars, should collectively fill the demand gap that has emerged. Within a clearer regulatory landscape, the crypto industry does have an opportunity to embed itself within the buyer sequence of U.S. Treasury bonds, but its role is more like a component of diversification rather than the solitary "ultimate buyer"; the real answer to who will underpin U.S. Treasury bonds will still be the combination of a broader set of institutional forces and policy tools.

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