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The United States Treasury has reported that the adoption of stablecoins and the volatility of cryptocurrencies could increase the demand for T-Bills as the growth of digital assets continues.
Stablecoin Adoption and Crypto Volatility
The U.S. Treasury acknowledged a significant increase in blockchain use and cryptocurrency investment in its Fiscal Year 2024 Q4 report. Stablecoins, which are fiat-pegged tokens like Tether and Circle’s USDC, have become key players in the digital economy. These “stable cash-like” tokens provide less volatile currencies for crypto traders and investors.
According to the 17-page document, Treasury experts estimate that crypto-stablecoin pairs comprise 80% of all digital asset transactions. Meanwhile, stablecoin issuers have gravitated toward holding short-term Treasury Bills as the bulk of token reserves. Currently, 63% of Tether’s $120 billion token reserves are held in T-Bills, while crypto operators have purchased $120 billion worth of Treasuries for stablecoin reserves.
Increased Adoption and Demand
Like crypto proponents, the Treasury suggests that fiat-pegged cryptos could see more adoption with further digital asset uptrend. However, federal government researchers argue that crypto’s inherent volatility and risk will lead to a “flight-to-quality demand for Treasuries.” As the digital asset market cap grows, there may be increased structural demand for Treasuries, both as a hedge against downside price volatility and as an on-chain safe-haven asset.
Stablecoin Reserves and Market Impact
Investors have housed over $176 billion in stablecoin across dozens of platforms and blockchain networks.
Jurisdictions like the European Union, which have a Markets in Crypto-Assets Regulation framework, have formally recognized fiat-tied virtual currencies. In the U.S., bi-partisan negotiations over stablecoin legislation have progressed toward bills, and speculators believe lawmakers may allow banks to issue assets like USDT.
New players are eyeing individual offerings as bullish sentiment engulfs the stablecoin sector. Blockchain giant Ripple has released its RLUSD, and even Trump’s World Liberty Finance is reportedly exploring a stablecoin launch.
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