Former BitMEX CEO Arthur Hayes has issued a provocative new analysis suggesting that the next wave of U.S. government debt financing will come not from the Federal Reserve, but from the private sector - via stablecoins issued by major U.S. banks. In a July 3 Substack post, Hayes outlined how a “stealth quantitative easing” operation could emerge from a confluence of fiscal strain, banking incentives, and blockchain infrastructure, ultimately benefiting Bitcoin, Ethereum, and the broader crypto ecosystem.
According to Hayes, Treasury Secretary Scott Bessent is facing an unprecedented challenge: selling over $5 trillion in U.S. Treasury bonds in 2025 to refinance maturing debt and fund new deficits - all while keeping the 10-year Treasury yield below 5%. With the Federal Reserve sidelined in its tightening cycle, the Treasury must seek new liquidity sources to prevent yields from spiking and financial markets from destabilizing.
Hayes believes the solution is already in motion: tokenize U.S. dollar deposits via bank-issued stablecoins that can be redeployed into short-duration Treasuries. These tokenized dollars would act as high-efficiency liquidity vehicles, enabling large banks to profit from yield spreads while supporting government debt issuance.
The former crypto exchange executive points to JPMorgan’s newly announced JPMD token - set to operate on Coinbase’s Ethereum-based Base networkas - a major turning point. JPMD allows the bank to digitize customer deposits and automate compliance functions, potentially saving billions in operational costs.
“These tokenized deposits will reduce costs by automating KYC/AML, free up capital, and enable banks to earn safe yield by buying T-bills,” Hayes wrote. He estimates that the adoption of stablecoins by "too big to fail" institutions like JPMorgan could unlock $6.8 trillion in new Treasury bill buying power.
This mechanism resembles quantitative easing in effect, though not in form. Instead of the Fed creating money to buy bonds, commercial banks would issue private digital dollars - backed by customer deposits - then use them to absorb new debt issuance. Hayes describes this as a stealth liquidity injection, a “liquidity bazooka disguised as innovation.”
He even cites a Republican proposal to end interest payments on reserves held at the Fed, which could force banks to reallocate up to $3.3 trillion in idle cash into Treasuries, further increasing T-bill demand.
Regulatory Shifts Could Hand Banks a Stablecoin Monopoly
The shift also has important implications for the stablecoin landscape. According to Hayes, legislation such as the GENIUS Act - designed to create a framework for U.S. stablecoins - may effectively hand dominant banks a monopoly on issuing compliant tokenized dollars.
“The real stablecoin play isn’t betting on crusty fintechs like Circle,” Hayes quipped. “It’s understanding that the U.S. government just handed TBTF banks the launch keys to a multi-trillion-dollar liquidity bazooka.”
If JPMorgan and other major banks convert even a fraction of their deposits into stablecoins, the revenue potential is staggering. Hayes suggests that such a move could double or triple JPMorgan’s market capitalization through risk-free, high-margin T-bill yields facilitated by digital rails.
This puts pressure on legacy stablecoin issuers like Circle and Tether, whose growth now faces structural limitations in a world where regulators may favor bank-issued solutions.
Bitcoin and Ethereum: The Big Winners
Hayes believes Bitcoin stands to benefit substantially from this evolution in financial plumbing. As stablecoin issuance accelerates and demand for Treasuries is met via tokenized liquidity, overall dollar supply will rise and real yields will likely decline - conditions historically favorable for crypto assets.
"Bitcoin thrives when liquidity expands and yields compress," he said. "This is debt monetization, just not by the Fed. It's coming from private banks using stablecoins to absorb sovereign debt.”
But it’s not just Bitcoin that could benefit. Hayes also points to Ethereum as a key infrastructure layer in this unfolding financial shift. JPMD and other bank-issued stablecoins are being launched on Ethereum-based networks like Base, reinforcing Ethereum’s status as the default settlement layer for tokenized real-world assets.
“This is debt monetization dressed in Ethereum drag,” Hayes wrote, highlighting how Ethereum’s validators, L2s, and blockspace will see increased demand if major financial institutions settle stablecoins on its network.
While Hayes did not elaborate on Ethereum’s investment case directly, analysts note that staking yields on ETH provide a compelling incentive for institutions looking for yield-generating alternatives to Bitcoin, potentially transforming Ethereum into a "digital bond" of sorts.
The Macro Backdrop: End of Fed-Led Liquidity?
Hayes’ broader thesis rests on a shift in how monetary and fiscal coordination is achieved. With the Federal Reserve constrained by inflation concerns, it can no longer directly inject liquidity through asset purchases. The Treasury, therefore, is turning to banks - and banks are turning to blockchain.
This aligns with recent market trends. U.S.-based spot Bitcoin ETFs have seen nearly $10 billion in inflows since May 1, reflecting surging institutional interest amid growing fiscal and political uncertainty. Meanwhile, balances of BTC on exchanges continue to fall, suggesting long-term investors are accumulating in anticipation of continued liquidity expansion.
Hayes does caution that short-term risks remain. A rapid replenishment of the Treasury General Account could temporarily drain market liquidity, similar to post-debt-ceiling scenarios in prior years. However, he argues this pullback would be short-lived and ultimately overshadowed by the larger liquidity wave building behind the scenes.
Final thoughts
For crypto investors, Hayes’ analysis underscores the emerging synergy between decentralized finance, banking infrastructure, and sovereign debt. Stablecoins - once seen merely as trading tools - are now positioned as macro instruments reshaping global capital flows.
Banks get yield. Governments get buyers. Crypto gets a liquidity tailwind. And blockchains like Ethereum become the plumbing behind a new financial regime.
If Hayes is correct, the next chapter of crypto adoption won’t be written through consumer speculation, but through deep integration into sovereign finance - where stablecoins fund deficits, and Bitcoin and Ethereum ride the rising tide of tokenized liquidity.