Contrary to criticism from certain US politicians, stablecoins could actually be a good thing for dollar dominance and demand for Treasuries. They may still be in their infancy, but they are one of the world’s largest holders of US Treasuries.
On October 18, DeFi analyst Miles Deutscher shared data comparing the Treasury holdings of nations to those of stablecoin issuers.
Demand for Treasuries
The combined total of stablecoins and issuers is the world’s sixteenth largest holder of US Treasuries.
Stablecoins now hold more treasuries than Norway, South Korea, Germany, Mexico, Saudi Arabia, and the UAE, he observed.
As of June, stablecoins held more than $100 billion in US Treasuries. According to the data, Japan is the world leader with over $1 trillion in holdings, followed by China with more than $800 billion.
“The crazy thing is the jump to get to #4 is relatively small,” exclaimed the analyst.
Treasury securities are government debt instruments issued by the US Department of the Treasury to finance government spending.
Furthermore, yields on these Treasuries have surged due to the Fed pumping up interest rates. The yield on the US 30-year Treasury bond hit its highest since 2011 last week.
This makes them very attractive to stablecoin issuers looking to back their dollar-pegged digital assets.
Although US regulators, central banks, and anti-crypto politicians still frown upon privately issued stablecoins, they could be a boon for the economy.
Moreover, daily stablecoin trading volume is equivalent to the world’s 22nd-largest sovereign currency, according to Forbes. They provide instant access to dollars to countries that otherwise would not have them.
Additionally, stablecoins are traceable on the blockchain, whereas cash greenbacks are not. This would benefit the tracking of illicit activity and terrorism financing, which politicians still blame on crypto.
Stablecoin Ecosystem Outlook
Industry-dominant Tether holds the most US Treasuries with 75.86% of its reserves in them, according to its transparency report.
USDT supply is currently near peak levels of $83.8 billion. This gives it a commanding market share of 68%, a figure that has been increasing this year.
Its closest competitor is Circle, which has $25.4 billion USDC in circulation, giving it a market share of 20.5%.
Moreover, the total market capitalization of all stablecoins is $123.5 billion, or around 11% of the entire crypto market cap.
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Source: https://beincrypto.com/stablecoins-demand-us-treasuries/