Eight Cents: The Arithmetic That Dismantles the Stablecoin Story

Eight cents. That is the drop in demand for US Treasury bills produced by every dollar that leaves a domestic bank deposit and enters a stablecoin. If that same dollar leaves a money market fund, the drop is 79 cents. If it leaves cash, 64.

The table comes from Nellie Liang and Brent Neiman, in a paper published in August 2026 by the Aspen Economic Strategy Group using first-quarter data from this year. Liang served as Under Secretary of the Treasury for Domestic Finance and, before that, as director of the Federal Reserve’s Division of Financial Stability. Neiman is an international macroeconomist at Chicago Booth. This is not a lobbying paper or an activist one: it is the US monetary policy apparatus putting on record exactly what the GENIUS Act does to the dollar.

And what it says, read closely, contradicts almost everyone who has weighed in on the subject over the past twelve months.

Debt demand isn’t added, it’s recycled

The argument underpinning the political defence of stablecoins in Washington is simple: issuers back their tokens with Treasury bills, so the sector’s growth creates structural demand for US debt. A sovereign funding instrument dressed up as payments innovation.

The sensitivity table shows that this argument depends entirely on a variable that is rarely mentioned: where the money comes from.

• If an American saver moves money from a checking account into a stablecoin, the bank loses a deposit but the system gains a buyer of bills. Net effect on T-bill demand: essentially nil, eight cents on the dollar. The bank had that money lent out or invested in something else.
• If the money comes from a money market fund, the effect is nearly neutral in the opposite direction: 79 cents. The money fund was already buying bills almost dollar for dollar. The stablecoin does not add a new buyer, it replaces an existing one.

In other words: capital rotating internally within the US financial system creates no incremental demand for sovereign debt. Only new, foreign money would — savings not currently held in dollar-denominated instruments, entering for the first time.

This is where the authors make the paper’s most uncomfortable claim: their best guess is that new foreign demand for dollar stablecoins would not produce the effect usually attributed to it. That is, the channel through which the story might work is, according to the two economists best placed to assess it, probably marginal.

The finding claims a second victim. The US banking lobby has built its opposition on deposit disintermediation, and that concern is legitimate from the standpoint of a regional bank’s income statement. But if the dominant flow comes from money market funds — instruments that are already not deposits and already do not fund bank credit — the damage to intermediation is considerably smaller than the congressional testimony suggests. Liang and Neiman’s number cuts against the crypto narrative as much as against the banking one.

What GENIUS actually is

Coverage of the GENIUS Act has treated it as a prudential framework: reserve requirements, licensing, federal supervision replacing the patchwork of state money transmission licences. All of that is in there. But the paper flags two elements that have barely surfaced in the press and that change the nature of the text.

First: the law turns stablecoin issuers into federal financial institutions for the purposes of the Bank Secrecy Act, and requires them to maintain effective sanctions compliance programmes. The authors note that this specific obligation has not been applied to other financial institutions. This is not harmonisation: it is a stricter standard applied selectively to a new category. That nobody is demanding an explanation for the asymmetry is striking.

Second: the paper explicitly invokes Section 311 of the USA PATRIOT Act (31 U.S.C. 5318A), which empowers the Treasury Secretary to designate a foreign financial institution as a primary money laundering concern, with measures ranging from additional reporting requirements to prohibiting or forcing the closure of the correspondent accounts that connect it to the US banking system.

That is the architecture of financial coercion Washington has used for two decades, and its chokepoint has always been a bank: cut the dollar correspondent and the institution is out of the system. GENIUS extends that mechanism to programmable money with one technically relevant difference: in a stablecoin, the control point is not a correspondent relationship, it is a freeze function in a smart contract. Faster, more granular, executable against individual addresses without needing a cooperating bank intermediary.

GENIUS is not just a prudential regime for issuers. It is financial power-projection infrastructure with a new technical substrate.

The calendar is the lever

The regulations implementing the law, by the paper’s own account, are still being written, and their final shape will determine whether the regime generates confidence or arbitrage. The commencement mechanism is the operational detail worth keeping in mind: the law takes effect on the earlier of 18 months from enactment or 120 days after the primary federal regulators issue the rules.

So there is a hard ceiling and an accelerator. Whoever controls the timing of the rulemakings controls when the system switches on, and that decision pits two predictable factions against each other inside the apparatus itself: those who want to accelerate adoption before other jurisdictions consolidate alternatives, and those demanding robust anti-money-laundering standards before the regime goes live. Any movement in the Federal Register on this point is more informative for the sector than three months of public commentary.

Two-thirds in self-custody

And here is the structural problem the regulatory conversation avoids. Citing Du, Gopinath and Stein (2026), the paper notes that roughly two-thirds of stablecoin holdings sit in self-custody wallets: neither on domestic nor foreign exchanges.

If that share is accurate, the compliance regime applies essentially at the points of issuance and redemption, not in circulation. The token circulates for much of its life outside any supervised intermediary. That does not invalidate the capacity to sanction — freezing at the contract level still works — but it does resize the real effectiveness of a sanctions programme applied to an instrument whose natural state is direct holding. It is the difference between policing a tollbooth and policing an open road.

Three incompatible monetary architectures

BIS Paper No. 170, published on 5 May 2026 by Iñaki Aldasoro, Jon Frost and Hiro Ito, supplies the other half of the picture. Its conclusion: stablecoins are already facilitating a form of digital currency substitution, with patterns consistent with capital control evasion, and the asymmetry is the one you would fear: the countries most exposed to dollarisation via stablecoins are the ones with the fewest tools to respond.

This inverts the usual de-dollarisation narrative. It is not about states negotiating their dollar exposure; it is about residents dollarising unilaterally from their phones while the central bank watches. It is a bottom-up phenomenon. And it has two faces the BIS itself does not resolve: what is a loss of sovereignty for a monetary authority is, for a citizen facing triple-digit inflation, access to a stable store of value and cheaper remittances.

On 1 June 2026 the ECB added a nuance that deserves attention: virtually all stablecoins in circulation are denominated in dollars, and its research suggests that significant issuance could amplify the international transmission of US monetary policy. Alongside that, a dissociation that explains more than many strategy reports: the dollar’s share of global funding markets has held close to its historical average, while in foreign exchange reserves it has gradually lost ground to geopolitical shifts.

The dollar is losing weight where states decide and holding it where private actors decide. Stablecoins play entirely on the second board. Measuring de-dollarisation by looking at central bank reserves — the macro analyst’s favourite exercise — is looking at the wrong board.

The institutional response has fragmented into three architectures that do not fit together. The United States regulates to expand: GENIUS legitimises the private issuer and turns it into a policy instrument. The EU regulates to contain and replace: MiCA restricts dollar stablecoins and favours euro-denominated ones, while the digital euro advances with the Council negotiating position agreed on 19 December 2025. China bans. And the BIS itself documents that US sanctions are actively accelerating the search for alternative payment routes — Russia’s gold accumulation, which nearly tripled reserves since 2014, and China’s, with 17 consecutive months of purchases through April 2024, is the analogue version of that same hedge.

Where this reading could fail

There are at least three ways the argument above could age badly.

The first is that the sensitivity table describes flows observed through the first quarter of 2026, under a pre-legal regime and with a user base skewed towards crypto natives. If GENIUS takes effect and stablecoins become the default payment rail for payroll, international trade or B2B settlement, the composition of incoming money changes. An Asian exporter who today holds balances in local currency and shifts to holding them in a dollar token is new, foreign demand — precisely the case in which the sovereign funding story does work. Liang and Neiman’s guess is a guess, and they label it as such.

The second is the self-custody figure. Two-thirds in self-custody is a number sensitive to definition: if it includes addresses custodied by entities that are not exchanges — fintechs, payment providers, brokers — the conclusion about the ineffectiveness of compliance in circulation weakens considerably. Check the methodology before building theses on that number.

The third is that the Section 311 angle assumes a willingness to use it that may never materialise. Designation as a primary money laundering concern is a nuclear instrument whose deployment carries diplomatic cost and fragmentation effects. That the lever exists does not mean it will be pulled; the mere fact that it exists, however, already alters the behaviour of any foreign counterparty with dollar exposure. And that deterrent effect is harder to measure than an enforcement action.

What to do with this if you build or invest

The operational consequence is not on the growth side, it is on the compliance and technical architecture side.

If your product touches dollar stablecoins — payments, treasury, settlement, on-ramps — the standard that will define your viability is not the reserve requirement, it is the ability to run an address-level sanctions programme with the traceability a federal examiner would demand. A standard that, per Liang and Neiman, applies to no other class of financial institution. That means the compliance cost per unit of volume will be structurally higher than for an equivalent bank, and that this cost favours concentration: it is a fixed expense, not a variable one. Issuers and providers that have already internalised it gain a moat; those planning to build it when the requirement arrives will be late, because the 120-day clock is not negotiable.

And if your investment thesis rests on the idea that stablecoin growth is structurally underwritten by the US Treasury’s interest in placing debt, the eight-cent arithmetic is a problem. The interest exists, but for different reasons: not funding, but control. A regime built to project power can be tightened as much as necessary without losing its function. One built to place bills cannot.