Arthur Hayes Proposes Bank-Issued Stablecoins as Solution to US Bond Market Liquidity Crisis

Former BitMEX CEO Arthur Hayes warns of systemic risks in US debt financing, citing insufficient demand for $5 trillion in Treasury bonds slated for 2024. The market's ability to maintain 10-year yields below 5% remains uncertain, potentially triggering financial instability without alternative liquidity sources.

Hayes positions bank-issued stablecoins as a transformative solution, estimating $6.8 trillion in dormant deposits could be mobilized for bond purchases. This mechanism WOULD allow traditional banks to convert existing deposits into stablecoins, creating a new funding pipeline for government debt while streamlining compliance overhead.

The proposal highlights how blockchain-based financial instruments are increasingly viewed as critical infrastructure for traditional markets. "When the plumbing fails, innovation becomes necessity," Hayes suggests, framing stablecoins as the next evolution in monetary transmission mechanisms beyond conventional banking channels.