Peter Schiff Ignites Crypto Clash: Stablecoins vs Treasury Bonds in 2025’s Financial Thunderdome

Gold bug turned crypto critic Peter Schiff just threw gasoline on the digital finance debate—and Wall Street's smelling smoke.

Stablecoins under fire

The Euro Pacific Capital CEO's latest broadside targets the $160B stablecoin market's reliance on Treasury bonds. "Digital IOUs backed by government debt? That's not innovation—it's musical chairs with extra steps," Schiff tweeted to his 800K followers.

Treasuries strike back

Pro-crypto analysts were quick to counter. "Sorry Peter, but 24/7 dollar-pegged liquidity beats waiting for NYSE opening bell," fired back Messari researcher Kunal Goel. The retort gained traction as 10-year Treasury yields dipped below 3.5% this week.

The real unspoken tension? Stablecoins now hold more Treasuries than most sovereign wealth funds—and nobody invited the Fed to this party.

As regulators circle, one thing's clear: in 2025's financial ecosystem, even 'stable' assets come with claws. Maybe Schiff should stick to predicting gold rallies that never materialize.

Stablecoins and Bond Market Dynamics

As the role of crypto assets in financial markets continues to grow, stablecoins, pegged to assets such as the U.S. dollar, are expanding their circulation. It was believed they were increasing demand for U.S. Treasury bonds. However, Schiff presented a notable counter-assessment to this view.

In a post on social media platform X, Schiff questioned the stablecoin market’s impact on Treasury bonds. According to him, funds moving into stablecoins are not creating new liquidity but are merely reallocating existing liquidity. This scenario may not lead to a structural increase in Treasury bond purchases. Crypto Traders Are Rushing to This App – Here’s Why You Should Too

Another highlight of Schiff’s analysis is the potential effects on long-term bond yields. The economist noted that a change in liquidity FLOW could negatively impact the supply-demand balance of bonds. This situation might lead to an increase in long-term interest rates.

Peter Schiff: “Liquidity shifting to stablecoins does not create new demand, it reallocates existing demand. This may lead to higher interest rates on Treasury bonds in the long run.”

The economist suggests that the new demand for stablecoins results in a zero-sum change in total financial sector liquidity. Schiff speculates that this process might also contribute to rising mortgage interest rates.

Stablecoins Create Bond Demand

Essentially, Peter’s comments aren’t taken seriously by many. Schiff, known for his negative assessments of cryptocurrencies, has voiced such views for years. Attention should instead be focused on the U.S.’s actions. The Trump administration clearly supports stablecoins, with the Treasury Secretary asserting that they bolster the dollar and increase bond demand. Peter’s statements appear to be speculative when compared to the U.S. Treasury Secretary’s stance.

Consider a scenario where an investor in Germany buys 100,000 USDC, leading Circle to purchase $100,000 in bonds to back its reserves 1:1. This effectively means that the German investor indirectly buys $100,000 worth of Treasury bonds. Was there an existing U.S. Treasury bond holding by the investor? No. Did it create new bond demand? Yes. Thus, Peter’s critics argue his remarks are baseless.

As debates over stablecoins’ impacts on U.S. Treasury bonds continue, Schiff’s evaluations capture attention in financial circles. He posits that stablecoin flows do not create new funds but merely redirect existing resources. This analysis underscores the need for investors and policy makers to exercise caution when observing stablecoin markets. It is also suggested that stablecoins could cause fluctuations in long-term yields and credit interest rates. Readers are encouraged to understand the potential impacts of stablecoins on the current financial structure when assessing their benefits and risks.