The United States owes more than $39 trillion in gross federal debt. But here’s where it gets interesting: the composition of who’s actually lending America all that money is shifting in ways that should make both traditional finance and crypto investors pay very close attention.

Foreign investors hold approximately $9.1 to $9.5 trillion in US Treasuries, representing roughly 30% to 32% of the publicly held debt. That sounds like a lot. It is a lot. But it’s a dramatic decline from where things stood just over a decade ago, when foreign holders owned nearly 49% of publicly held US debt back in 2011-2012.

The great rotation away from Treasuries

Japan remains the largest foreign holder at roughly $1.18 trillion, followed by the UK at approximately $866 billion and China at around $683 billion. China’s position is particularly notable because it has been steadily reducing its exposure for years, a trend that accelerates every time US-China tensions flare up.

The current account deficit sits close to 4% of GDP. Someone has to fund that gap. And increasingly, the “someone” isn’t a central bank in Tokyo or Beijing. It’s domestic mutual funds, the Federal Reserve’s residual holdings, and, in a twist that would have seemed absurd five years ago, a stablecoin company based in the British Virgin Islands.

Recent reports indicate that foreign demand for US Treasuries is slowing, with several sovereign wealth funds and central banks diversifying into other countries’ government bonds.

Enter Tether, America’s unlikely creditor

Tether, the issuer of the USDT stablecoin, was one of the top foreign net buyers of US Treasuries in 2024, purchasing approximately $33.1 billion on a net basis. A crypto company that didn’t exist 11 years ago is now a more aggressive buyer of American government debt than most countries.

This isn’t charity. Tether backs its stablecoin reserves primarily with short-dated US Treasury bills, which means every time someone mints new USDT, Tether essentially needs to go shopping for more government paper.

Tether’s Treasury holdings also create an unusual feedback loop. The more widely USDT is adopted globally, the more Treasuries Tether needs to buy, which in theory supports demand for US debt at precisely the moment when traditional foreign buyers are pulling back.

Why this matters for crypto and traditional investors

The AI boom has already demonstrated a key dynamic, as private capital floods into US equities, particularly tech stocks, rather than parking in government bonds.

For crypto investors specifically, Tether’s growing role as a Treasury buyer introduces a novel form of systemic interconnection. A major disruption to USDT, whether from regulatory action, a de-pegging event, or a sudden wave of redemptions, could theoretically ripple into the Treasury market if Tether were forced to liquidate holdings quickly. The $33.1 billion in net purchases during 2024 alone makes Tether a meaningful participant, not just a rounding error.

On the flip side, several stablecoin bills currently moving through Congress would essentially mandate that issuers hold high-quality liquid assets like Treasuries. If those bills pass, the crypto industry could become an even larger structural buyer of US debt, partially filling the gap left by retreating foreign governments.