Treasury Secretary Scott Bessent’s endorsement of dollar-pegged stablecoins creates a pathway for up to $34 trillion to flow into decentralized finance protocols such as Ethena, Ether.fi, and Hyperliquid.
Arthur Hayes reported in his Aug. 27 blog post that Bessent aims to redirect capital from the $13 trillion Eurodollar system and $21 trillion in Global South retail deposits into stablecoin infrastructure that purchases Treasury bills.
Yet, he said that this strategy addresses two problems: the Treasury’s inability to track Eurodollar flows and the need for price-insensitive buyers of government debt.
The plan leverages US social media platforms as distribution channels for stablecoin adoption. Meta’s WhatsApp could deploy crypto wallets to billions of users worldwide, enabling seamless transactions with stablecoins while bypassing local banking systems.
DeFi protocols positioned for “secular rise”
Stablecoin issuers must invest deposits in Treasury bills to maintain dollar parity, creating guaranteed demand for government debt.
Tether earns a net interest margin of 4.25% to 4.5% by holding T-bills, while paying no interest on USDT tokens. This business model scales directly with deposit growth, providing Bessent with price-insensitive buyers for short-term government securities.
Bessent can weaponize dollar dominance to force compliance with the adoption of stablecoins.
One example mentioned by Hayes is threatening to exclude foreign banks from Federal Reserve swap lines during financial crises. This move would push Eurodollar deposits toward US-regulated stablecoin platforms.
In the case, Hayes projects a total stablecoin circulation of $10 trillion by 2028. In this scenario, he argued that three protocols are poised for a “secular rise.”
The first is Ethena, which operates the synthetic dollar system USDe to generate yields by shorting crypto derivatives against long positions. As of press time, Ethena had $12.4 billion in total value locked (TVL) in the protocol.
Road to 25% market share
The analysis forecasts that USDe could achieve a 25% market share of total stablecoins, potentially reaching a supply of $2.5 trillion.
Hayes also mentioned Ether.fi. The protocol offers stablecoin spending through Visa-powered debit cards, allowing users to spend their crypto anywhere Visa is accepted.
The platform earns revenue at a ratio comparable to JPMorgan’s 1.78% fee-to-deposit ratio and can also capture decent value in the expansion of the US dollar-pegged stablecoin market.
The third protocol mentioned in the post is Hyperliquid. The protocol dominates decentralized perpetual trading, with a 63% market share.
In addition, Hayes cited that Hyperliquid processes daily volume representing 26.4% of the total stablecoin supply in trading activity.
Considering his $10 trillion prediction, the way these three protocols interact with stablecoins could heavily benefit them and their native tokens.
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