Cryptocurrencies

Stablecoins drive increased demand for US Treasury bills

Article Image

The United States Treasury Department has reported that stablecoins are contributing to a rising demand for short-term government bonds, specifically Treasury bills. 

This information was revealed in the minutes from a meeting of the Treasury’s Borrowing Advisory Committee, which took place on October 29. 

During this meeting, members discussed the implications of stablecoin adoption and the potential tokenisation of Treasury bills. 

One committee member proposed the idea of creating a permissioned blockchain for T-bills, indicating a growing interest in integrating blockchain technologies within the US financial system. 

The minutes noted, “[B]ecause most stablecoin collateral reportedly consists of either Treasury bills or Treasury-backed repurchase agreement transactions, the growth in stablecoins has likely resulted in a modest increase in demand for short-dated Treasury securities.” 

The committee acknowledged that while T-bill tokenisation could foster operational improvements and innovation within the Treasury market, it might also introduce risks to financial stability. 

One member emphasised that implementing tokenisation would likely necessitate a privately controlled and permissioned blockchain overseen by a trusted government authority. 

Stablecoins, which are digital tokens pegged to the US dollar, have become essential for trading and payment systems. 

As of 2024, the total market capitalisation of stablecoins has reached approximately $180 billion, with Tether (CRYPTO:USDT) leading at $120 billion, followed by Circle’s USD Coin (CRYPTO:USDC) at around $35 billion. 

Additionally, tokenised real-world assets, including Treasury securities, present a significant market opportunity estimated at $30 trillion globally. 

Colin Butler from Polygon (CRYPTO:MATIC) highlighted the surging demand for products that tokenise T-bills and other liquid yield-bearing assets. 

Among notable funds in this sector are BlackRock’s USD Institutional Digital Liquidity Fund with about $530 million in assets under management and Franklin OnChain US Government Money Fund with approximately $410 million.

Disclaimer

Grafa is not a financial advisor. You should seek independent, legal, financial, taxation or other advice that relates to your unique circumstances. Grafa is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on the information provided directly or indirectly by use of this platform.

Publisher
Grafa