The U.S. Treasury market is going through new dynamics from the digital asset world, in line with a current report from Financial institution of America’s (BofA) charges technique staff.
Analysts level to stablecoin demand for Treasury payments and the tokenization of cash market fund shares as two forces more and more shaping investor conduct.
Stablecoin demand for T-bills
Stablecoins, that are cryptocurrencies pegged to property just like the U.S. greenback, have turn into an important a part of crypto buying and selling and cross-border funds. BofA expects these issuers to steadily enhance their use of short-term U.S. authorities debt, significantly Treasury payments.
The financial institution tasks stablecoin allocations to T-bills may increase by $25 billion to $75 billion over the following yr. Whereas vital in scale, analysts harassed that this degree of demand is just not massive sufficient to meaningfully shift general Treasury market dynamics.
As a substitute, BofA sees stablecoins as posing a larger problem to cash market mutual funds (MMFs), which historically seize related yield-seeking flows. As a result of stablecoins can not at the moment pay curiosity, MMFs keep an edge – however one which will slim if regulatory adjustments or inventive workarounds permit stablecoins to distribute yield.
Tokenization as a defensive technique
The report additionally notes a rising curiosity in tokenization amongst MMF suppliers, with some viewing it as a method to defend towards stablecoin competitors. In July 2025, BNY and Goldman Sachs collectively launched blockchain-based expertise to report possession of choose MMF shares.
That effort represented the primary rollover of tokenized MMF shares, a milestone that aligns with broader business momentum following the passage of the GENIUS Act, which created a federal framework for stablecoin regulation.
Slim window of benefit
BofA argues that tokenized MMF merchandise may briefly supply a aggressive edge by combining conventional yields with blockchain-based settlement effectivity. Nonetheless, this benefit could show short-lived if stablecoins discover methods to combine yield options.
For now, analysts consider MMFs nonetheless maintain the higher hand, however the fast convergence of digital property with conventional finance suggests the U.S. debt market could proceed evolving in methods few anticipated just some years in the past.
