China's US Treasury Holdings Sink to $618 Billion Low, Bolstering Bitcoin (BTC) Case

Holdings at 18-Year Low

Fresh figures from the US Treasury's monthly international capital reporting show China trimmed its stock of US government debt to $618.0 billion in July, down from $633.4 billion in June — the lowest level since 2008 and an 18-year trough. The reduction is part of a longer strategic retreat: wary of dollar weaponization amid worsening US–China friction, Beijing has been cutting its Treasury exposure since the first Trump administration, and it now ranks third among foreign creditors behind Japan and the United Kingdom. Overall foreign holdings of US debt slipped for a second consecutive month, a sign the fiscal-sustainability debate is spilling directly into reserve policy. The 10-year Treasury yield has climbed back above 5% as deficit accumulation and refinancing needs strain the bond market. Beijing's answer so far is gold, not tokens: the People's Bank of China has added gold for 22 consecutive months, lifting reserves to 76.73 million troy ounces — even though domestic crypto remains barred and homegrown chains like NEO, once marketed as China's smart economy blockchain, never gained official favor. For Bitcoin (BTC) watchers, the rotation out of sovereign paper is the clearest evidence yet that reserve diversification has moved from theory to practice.

21 Banks Commit to a Dollar Token

Days after that reserve data landed, the commercial-banking side of the dollar began its own pivot. On September 1, twenty-one financial institutions — among them Bank of America, Citi, Goldman Sachs and Deutsche Bank — committed to forming a joint company in the second half of 2026 to issue a stablecoin, with a dollar token targeted for the first half of 2027 and a euro version to follow. The group says the product will comply with the GENIUS Act in the United States and MiCA in Europe. The consortium is not moving alone: SoFi opened its SoFiUSD token to roughly 15 million app members in May, JPMorgan runs its JPMD deposit token on Base, and HSBC plans a Hong Kong dollar stablecoin for late 2026. Executives frame the urgency as competitive loss rather than fashion. Infinia chief executive Ianai Urwicz points to B2B stablecoin payments that surged 733% year-on-year to $226 billion in 2025, and warns up to $1 trillion of emerging-market deposits could migrate to stablecoins within three years. First Digital's Vincent Chok adds that stablecoin settlement volume passed $28 trillion in the first quarter of 2026 — flows moving across networks banks historically do not control.

USDT and Arc Hold the Corridors

Whether a bank token can actually leave the issuing bank is the open question. At Jackson Hole on August 28, Bank for International Settlements general manager Pablo Hernández de Cos argued that much of what banks have built either runs on closed platforms or is better described as bank-issued stablecoin — and that such tokens share many of the shortcomings of existing stablecoins; the BIS itself still favors tokenized deposits, as stated in its official Jackson Hole speech. While the consortium drafts its charter, the independents are shipping. Circle switched on the public mainnet of Arc, a layer-1 network where fees are paid in USDC, on September 16, with BlackRock, Visa, Mastercard, Standard Chartered and DTCC among validators. Tether's USDT held roughly $183 billion in circulation as of mid-September — more than every other stablecoin combined, per stablecoin market-cap data — and Open USD, backed by Visa, BlackRock, Google and DoorDash with more than 140 partners sharing reserve income, is due later this year. In corridors where dollars are scarce, settlement assets from USDT to older cross-border tokens such as XRP already route the flow, while fintech entrants like PayPal set the template for consumer digital dollars. Speed alone will not dislodge them: the holder's trade-off is no FDIC insurance and no yield — the very dynamic that once powered yield farming on open DeFi rails. Readers tracking the market in real time can follow live spot and futures prices on Bitget.

Where Dollar Demand Goes Next

The through-line in this week's developments is a simultaneous re-pricing of what the dollar is and where it lives. Sovereign reserve managers are rotating out of Treasuries into gold at a 22-month unbroken pace, while the banks that profit from deposit float race to digitize it before upstarts capture the flow. COINOTAG's reading: the BIS record is the load-bearing document here, because it concedes the interoperability gap is unresolved — issuance alone decides nothing. The same de-dollarization logic filling Beijing's gold vaults underpins Bitcoin's store-of-value case; the next TIC release will show whether foreign Treasury demand stabilizes or the rotation accelerates.