Washington Is Measuring Stablecoins by the Wrong Number

Every month, under a law Congress passed last summer, the companies that issue dollar stablecoins will be required to publish two figures and have their chief executive and chief financial officer swear to them: how many tokens are outstanding, and what sits in reserve behind each one.

It is a sensible rule. It is also, for anyone trying to understand what these instruments are doing in the world, almost beside the point.

Earlier in September, Bloomberg reported that the stablecoin market had shrunk in the first half of the year, its first contraction since 2022. Tether's USDT slipped by close to $3 billion to about $184 billion. Circle's USDC fell to around $72 billion.

The story was framed as a setback for the Treasury Department, which has come to see stablecoin issuers as a fresh buyer of its bills. Tether holds roughly $134 billion of Treasuries and reverse repo; Circle about $63 billion.

Secretary Scott Bessent has spoken of a $3 trillion market by the end of the decade, set against some $7 trillion of short-term bills outstanding. Measured against that ambition, a shrinking pile of tokens looks like bad news.

I spent the first half of my career as a chief financial officer, and I would like to offer a CFO's objection. No serious operator judges a business by the cash sitting in its accounts on the last day of the month.

You judge it by what moves through. Cash on hand is a snapshot. Throughput is the business. Washington has written a disclosure regime around the snapshot, and the market has followed, and the result is that the most-quoted number in this industry is the one that says least.

Consider what the other gauge shows. Visa's on-chain analytics, which strip out bot traffic and exchanges shuffling their own balances, recorded $1.79 trillion of adjusted stablecoin volume in June, the highest month on record and more than double June of last year.

Over the trailing twelve months the figure is about $10 trillion. Standard Chartered estimated in March that the average stablecoin now turns over roughly six times a month, about twice the pace of two years ago.

Visa's own stablecoin settlement business, in which merchants and acquirers are actually paid in tokens, reached a $20 billion annualised run rate in September, up from about $3.5 billion at the end of last year, with more than 160 stablecoin-linked card programmes live.

So the supply of dollars on-chain fell modestly, and the work done by each dollar roughly doubled. Any CFO would recognise the pattern. It is a payments company getting more efficient with its float. It is not a payments company in retreat.

This is where I part company with both the sceptics and the boosters. The sceptics read falling supply as fading relevance. The boosters, for years, charted rising supply as proof of adoption. Both were reading a balance sheet and calling it an income statement.

Supply rises when traders need collateral on exchanges and falls when they do not; it tracks speculative appetite, not usage. A stablecoin used to pay a supplier in Manila or settle a tokenised share in Dubai is received and spent within hours.

It adds almost nothing to the supply figure and a great deal to the volume figure. As that kind of use grows, and everything I see in Asia and the Gulf says it is, the number in the monthly certified report will understate the very thing the government hopes to encourage.

There is a second problem with the snapshot, and it is one the law makes worse. An issuer earns its living on the interest its reserves generate, and the GENIUS Act will forbid it from passing that yield to holders. The commercial incentive, then, is for dollars to sit still. The public interest is for dollars to move.

A regulatory regime that reports only the stock rewards the first and is blind to the second.

When Circle went public, analysts valued it on float and rates, which is the right way to value a money-market fund and a strange way to value a piece of payments infrastructure. The market is pricing these companies as savings accounts because the only certified number describes a savings account.

Let me be fair to the Treasury's arithmetic. If what you want is bill demand, outstanding supply is the number that buys the bills, and no amount of velocity changes that. But the durability of that demand depends entirely on why the tokens are held.

Dollars parked as trading collateral leave the moment sentiment turns; that is what happened this spring. Dollars held because a payroll, a remittance corridor or a settlement cycle runs through them stay, because nobody unwinds a payroll when a token price falls.

Throughput today is the best available forecast of sticky supply tomorrow. If Washington wants to know whether the $3 trillion will arrive, it should be watching the flow, not the reservoir.

The institutions are already voting with their plumbing. The London Stock Exchange said in September it would roll out tokenised stocks, following Nasdaq's design earlier this year; tokenised equities on-chain have tripled since January to more than $3 billion.

Standard Chartered became the first globally systemic bank to offer institutional spot crypto trading in the United Arab Emirates. Tokenised Treasury funds have grown from $11 billion to $16 billion since March.

None of these requires more stablecoins to exist. Every one of them requires stablecoins to move, around the clock, across borders, with finality. That is settlement demand, and settlement demand does not show up in a supply chart until long after it has become the reason the supply exists.

What should change is modest. The Treasury's proposed implementing rules are open for comment until 19 October.

The monthly report could be broadened, without adding a line to the statute, to include the metrics any counterparty already wants: adjusted transfer volume, active sending addresses, the share of transfers that are not exchange-to-exchange, merchant and payroll settlement as a proportion of the whole.

The issuers have these numbers. Publishing them would do more for their standing in Washington than a decade of lobbying, because it would let policymakers see the thing they are regulating.

The supply figure will recover; it always does when the trading cycle turns, and when it does the headlines will turn cheerful and will be no more informative than they are now. The durable story is the one being written in settlement rails, card programmes and exchange plumbing, one transaction at a time.

I would ask Washington to do what any good finance department does at the close of a quarter. Look past the cash balance. Read the flows.

Pranav Agarwal is a partner at Ajna Capital, a Dubai-based family office that invests in frontier-technology venture funds and builds companies in blockchain, AI and longevity.