Stablecoins to control 15% of US Treasury market? Experts say…

• Stablecoins could be a major US Treasury bills (bond market) player. 
• Per Bitwise exec, stablecoins’ US Treasury holding could grow to 15%. 

US Treasury bills have become the most preferable back-up asset for most stablecoins issuers. Given their safety and liquid nature, issuers like Tether and Circle have become key players in the market to enable 1:1 backing for every stablecoin token issued. 

According to Juan Leon, investment strategist at digital asset manager Bitwise, US Treasury bills held by stablecoins could grow to 15% from the current 1%. 

‘Stablecoins hold ~1% of US Treasury bills today, but that could soon grow to 15%, ranking them in the top 3 holders.’ 

Source: X

Stablecoins: Not ‘baby whales?’

The above Bitwise outlook was a reaction to a recent Bloomberg report that downplayed the significance of stablecoins in the US Treasury bills market.

According to the report, stablecoins’ 1% control on the market meant that issuers were ‘baby whales,’ less impactful than other bond market players. 

However, Leon noted that the digital economy was growing at 3X, and a likely US stablecoin framework would accelerate the segment.

She added that stablecoin went from $0- $170B in a few years and could grow faster to $1T when the US passes a stablecoin bill by 2025. 

‘Stablecoin usage is growing at an exponential rate, meaning going from $170B to $1T will happen faster than from $0 to $170B. 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+).’ 

Howard Lutnick, chairman of American investment bank giant Cantor Fitzgerald, echoed Leon’s sentiments. Lutnick praised Tether for helping pay US debt by opting for US Treasury bills as a backup. 

‘Tether has taken that to the next level by putting $USDT, the digital dollar, into the hands of people in emerging markets across the world. Since USDT is backed by tens of billions of US Treasuries, the 300 million USDT wallet holders around the world are helping finance our debt.’

On his part, Quinn Thompson, crypto hedge founder of Lekker Capital, noted that Lutnick’s public endorsement of Tether signaled a possible ‘change.’ 

According to Coingecko data, as of the time of writing, the stablecoins market cap was $169.5 billion, with Tether’s USDT leading with $117 billion, followed by Circle’s USDC at $34.8 billion. 

Source: Coingecko