Global debt reached a record $365 trillion at the start of the year, according to data published by the Institute of International Finance (IIF). This historic high reflects a $10 trillion increase in just six months, marking a slower pace compared to previous years.
Key drivers of rising global debt
The IIF attributed the latest surge in debt to three main elements: increased borrowing in emerging markets, capital inflows into artificial intelligence infrastructure, and expanded military spending. Among these, emerging markets accounted for $6.5 trillion of the newly accumulated debt, with China making the most significant contribution.
Although global debt continues to grow, the current rate of increase is roughly half of the $21 trillion recorded during the previous six-month period. Analysts from the IIF explained that elevated interest rates, higher debt servicing costs, rising energy expenses, and global geopolitical tensions, such as the conflict involving Iran, slowed down the pace.
Shift in US Treasury creditors
Economists from the Federal Reserve Bank of San Francisco highlighted a notable change in the profile of those financing the US government. Since 2006, the ratio of US government debt to national GDP has jumped from around 35% to 100%. During this period, the makeup of the country’s creditors has shifted dramatically.
Foreign investors once dominated holdings of US Treasuries, accounting for more than half of all purchases in the late 2000s. By early 2026, their share had dropped to about 30%. This shift was driven mostly by a significant pullback from Chinese investors, who halved their Treasury holdings midway through 2026. The decline of foreign involvement follows a trend dating back to the 1970s, when foreign governments were the primary buyers of Treasuries, now holding just 40% as of early 2026.
Meanwhile, private investors have taken a larger role in supporting US debt, including a relatively new type: stablecoin issuers. The Federal Reserve Bank of San Francisco noted that since 2023, stablecoin issuers have accumulated short-term US Treasuries rapidly, outpacing even Japan, currently the largest foreign holder of US government debt.
Stablecoins and Treasury demand
The rapid growth in stablecoin issuers’ US Treasury purchases is closely linked to the operational structure of these digital assets. Stablecoins are required to maintain reserves that allow for one-to-one redemptions with the US dollar. This requirement leads issuers to hold highly liquid and low-risk instruments, with short-term US Treasuries being a preferred choice.
Legislation enacted by the GENIUS Act in 2025 further cemented these operational standards, mandating federal oversight and eligibility criteria for payment stablecoins’ reserves. According to research by Brookings economists Nellie Liang and Brent Neiman published in August, such reserves now include US Treasuries and other approved assets. As of June 2026, the total stablecoin market size is estimated at $270 billion.
The San Francisco Fed projects that if stablecoin growth continues at its current rate, demand for short-term Treasury bills from issuers could reach $400 billion by 2030. While this remains below Washington’s overall borrowing needs, the increase has already begun influencing short-term bond yields. Research from the Bank for International Settlements and the IMF notes the growing impact of stablecoin demand on securities markets.
Stablecoin issuers have rapidly expanded their holdings of short-term US Treasuries since 2023, surpassing the pace of Japan, currently the largest foreign holder of US government debt. This accumulation plays a role in the changing landscape of US Treasury creditors, especially as foreign investors step back.
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