Can Stablecoins Save U.S. Debt? Inside Wall Street’s “Pennsylvania Plan”

A new strategy, dubbed the “Pennsylvania Plan,” is making waves on Wall Street. According to Deutsche Bank strategist George Saravelos, this approach could become a cornerstone of former President Trump’s economic playbook, leveraging stablecoins and domestic incentives to reduce America’s reliance on foreign buyers of U.S. debt — and potentially restore the dollar’s dominance on the world stage.

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What Is the Pennsylvania Plan?

Named after Pennsylvania Avenue — home to the U.S. Treasury — the plan aims to tackle America’s ballooning fiscal and current account deficits. As of early July 2025, U.S. federal debt had soared past $36 trillion, sparking fresh concerns about sustainability.

Unlike previous proposals like the controversial “Mar-a-Lago Accord,” which focused on abrupt fiscal changes, the Pennsylvania Plan takes a more market-friendly route. It envisions using financial innovations like dollar-backed stablecoins, regulatory easing, and tax incentives to shift U.S. debt from foreign hands back to American investors — effectively “de-globalizing” the debt market.

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Stablecoins as America’s Digital Trump Card

The plan’s centerpiece is the use of dollar stablecoins as a modern financial tool to anchor global demand for U.S. debt. Here’s how it could work: stablecoin issuers would expand their reserves by holding short-term U.S. Treasury bills, then issue stablecoins that circulate worldwide as a digital form of the dollar.

In practice, that means when international investors buy or transact in dollar stablecoins, they’re indirectly supporting U.S. debt — even if they’re no longer directly purchasing Treasuries. This creates a new pipeline of demand for short-term U.S. bonds, shoring up the Treasury market and strengthening the dollar’s global grip.

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Aligning with Trump’s Economic Playbook

Recent policy discussions hint at a coordinated strategy aligned with the Pennsylvania Plan:

• Regulatory Adjustments: The Treasury and Federal Reserve are reportedly weighing looser supplementary leverage ratio (SLR) rules, which would make it easier for banks to hold Treasuries.
• Interest Rate Signals: Fed officials have floated the possibility of rate cuts in Q3 2025, potentially boosting liquidity and encouraging more investment in U.S. assets.
• Tax Incentives: Proposals include tax breaks for institutions like insurance companies and pension funds that commit to holding Treasuries long-term.
• Specialized Bonds: Ultra-long-term bonds (50–100 years) and floating-rate notes tailored to different institutional needs are under consideration.
• Financial Repression Tools: If needed, the government could require insurers or pensions to increase allocations to Treasuries, ensuring domestic absorption of debt.

Together, these measures reflect a clear intention: if foreign investors lose interest in U.S. debt, domestic capital will step in — creating a more stable, locally anchored market.

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Why It Matters Globally

If successful, the Pennsylvania Plan could reshape how the world interacts with the dollar. By embedding stablecoins into the financial system, global markets would remain tied to U.S. debt — even if direct foreign purchases of Treasuries decline.

However, critics warn the strategy could crowd out non-dollar currencies, deepening global dollar dependence and exacerbating financial imbalances. Moreover, it hinges on the success of stablecoins — a sector still wrestling with regulation and public trust.

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The Stakes Ahead

While the plan is still speculative, its emergence highlights a critical inflection point for U.S. fiscal policy. If Washington can harness financial innovation to rewire its debt markets, it could prolong the dollar’s reign. But failure could accelerate shifts away from dollar-based systems, especially as alternative assets and currencies gain traction globally.

As debates continue, investors and policymakers alike will be watching closely: could stablecoins really become America’s secret weapon to manage its towering debt?

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Risk Warning
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