Quick Take
Juan Leon, Senior Investment Strategist at Bitwise Invest, highlights the growing influence of stablecoins in the US Treasury bill market. Currently, stablecoins hold approximately 1% of US Treasury bills, but Leon projects this could surge to 15%, potentially making them one of the top three holders of these securities.
Leon shared a Bloomberg chart illustrating that as of June, Tether held $80.9 billion in Treasury bills, surpassing Schwab’s US Treasury Money Fund at $70.7 billion and Fidelity Investments’ Money Market Treasury Only Fund at $79 billion.
This positions stablecoins as significant players in the market, a role traditionally dominated by the $6.19 trillion money-market mutual fund industry, which held around $2.4 trillion in government debt by the end of June, according to Bloomberg. However, the Federal Reserve’s potential rate cuts, possibly as soon as September, raise concerns about the future attractiveness of Treasury bills.
Paolo Ardoino, Tether’s CTO, stated in June with CryptoSlate that Tether would continue buying US Treasuries regardless of rate cuts.
The US Treasury could face challenges in finding buyers for its massive debt, especially as China continues to reduce its holdings, roughly $50 billion in the past twelve months, and Japan, the largest holder, might do the same to defend its weakening currency.
Leon emphasizes the need for the US government to be crypto-friendly, with bipartisan support for stablecoin regulation in Congress, and to follow in Europe’s footsteps. Leon predicts that stablecoins, with a market cap currently around $170 billion, could reach $1 trillion sooner than expected, making them dominant players in the Treasury market.
“At $1T, stablecoin purchases of treasury bills would dwarf the 10 largest money market funds, and would put them in the top 3 holders ($800B+)”.
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