Analysis of the "Pennsylvania Project" hotly discussed on Wall Street: Can stablecoins transform U.S. debt and restore the glory of the dollar?

Deutsche Bank strategists recently pointed out that the U.S. government appears to be adopting a brand new financial strategy called the "Pennsylvania Plan", attempting to break free from foreign debt dependence and consolidate the U.S. dollar's strong position through U.S. dollar stablecoins and domestic incentive policies, which may become the core economic weapon for Trump to save U.S. debt. A few days ago, Deutsche Bank AG's foreign exchange research head George Saravelos proposed the "Pennsylvania Plan", aimed at addressing the dual pressures of long-term U.S. fiscal deficits and current account deficits. Its name is derived from Pennsylvania Avenue, where the U.S. Treasury is located. As of July 2, 2025, the U.S. federal government debt scale has reached approximately 36.2 trillion dollars. The Pennsylvania Plan has thus been widely discussed in international financial and media circles, and is viewed as "one of the possible policy directions for Trump's second term". Compared to the previously controversial Mar-a-Lago Accord, this plan focuses on moderate and feasible market-based methods, attempting to achieve "de-foreignization" of U.S. debt through U.S. dollar stablecoins, regulatory relaxation, and tax incentives, bringing debt back to domestic absorption. Deutsche Bank's analysis points out that the U.S. economy is facing macro constraints: "external deficit, negative Net International Investment Position (NIIP), and government inability to compress expenditures". In situations where traditional methods are ineffective, they can only seek sustainable new financing routes through financial techniques and policy combinations. The most attention-grabbing part of this plan is using U.S. dollar stablecoins as a starting point, allowing the U.S. government to indirectly retain overseas funds that are currently lacking enthusiasm or likely to escape during bond market fluctuations. Saravelos indicates that the U.S. government can encourage or support stablecoin issuers to expand scale with Treasury bills as reserve assets, issuing digital dollars circulating in global markets. This allows foreign investors to still support U.S. debt while investing or conducting financial operations through U.S. dollar stablecoins, creating an entirely new debt acceptance channel for the United States. In other words, the success of stablecoins will form new global demand for the U.S. dollar, transforming foreign investors from directly holding U.S. debt to indirectly holding it through stablecoins. This simultaneously consolidates U.S. short-term debt sales and keeps the global monetary market immersed in the "digital dollar" flood, bringing U.S. dollar hegemony back to glory. The specific policies preset by the Pennsylvania Plan have also gradually surfaced recently, including discussions between the U.S. Treasury and Federal Reserve about relaxing Supplementary Leverage Ratio (SLR) regulatory restrictions, and Federal Reserve board members releasing potential signals of third-quarter interest rate cuts. These actions' consistency with the plan's strategy also indicates that the Trump administration is indeed pursuing this strategy.

Saravelos mentioned the following supporting measures in the plan:

• Tax incentive benefits: Providing tax exemptions or deductions for long-term debt-holding institutions (such as insurance companies and retirement funds)

• Issuing special government bonds: Such as ultra-long-term bonds of 50 100 targeting years for pension funds, floating-rate bonds for banks and funds, etc., to meet specific asset allocation needs

• Financial repression measures: When necessary, the government can legislate to force specific institutions like insurance companies or retirement funds to increase their US bond allocation

When the United States is unwilling to improve its fiscal condition, the sapath with the least political and economic resistance is for the US government to seek more fiscal funds through domestic investors, replacing foreign capital with domestic funds to build a more stable bond market structure.

Global Effect: Stablecoins Compress Non-USD Currency Survival Space

Crypto KOL Vito pointed out that if the Pennsylvania plan is successful, it will not only affect the US internal market but also impact the global financial order:

USD stablecoins will erode other countries' efforts to promote local legal currency internationalization, while the United States can obtain global "seigniorage" dividends. Using stablecoins as a new carrier, Americans can continue to buy globally and absorb global value assets.

In this way, the United, achieves more more efficient global economic control, while non-US countries face more challenging financial sovereignty defense battles.

(USD Depreciation Raises Concerns! Crypto Market Calls for Stablecoin Diversification: Non-USD Options Become DeFi's New Trend)

Pennsylvania Plan as USD Lifeline

This new financial strategy related to stablecoins provides the United States with a debt export and uses its high liquidity to stimulate and consolidate US dollar demand. The Pennsylvania plan does not change the imbalance of the US fiscal structure but buys more time and leverage through blockchain technology and policy design.