The Stablecoins stage to the dominant current could shake up certain parts of the US Treasury market

While the stablecoins take a step towards the dominant current, certain segments of the US Treasury market, including short-term titles, could be vulnerable to volatility as they become more closely linked to the world of cryptocurrency.

The congress is about to adopt legislation establishing a regulatory framework for the floors, which should help to legitimize the pointed cryptocurrencies in dollars which are commonly used by cryptographic traders to move funds between tokens.

Supporters of the bill argue that clear rules will stimulate a new Stablecoin activity and will support an increasing sector of buyers of the US debt in the short term, or T Tickets, which are generally considered as equivalent securities in cash. But others fear that a larger imprint for a relatively new and more volatile industry in turn stimulates the volatility of the bill market.

“In the event of a sudden loss of confidence, regulatory pressure or market rumors, this could trigger large-scale liquidations, potentially depressing treasury prices and disrupt fixed income markets,” said Cristiano Ventricelli, vice-president and main analyst of digital assets with Moody’s notes.

“A problem in the stable sector could spread in broader financial markets, affecting institutions holding similar assets or (this) relying on the liquidity of the stable,” he added.

If signed, the bill on stables would obtain tokens to be supported by liquid assets – such as US dollars and short -term cash tickets – and monthly disclosure of transmitters on the composition of their reserves. This means that if the stablecoins should grow, transmitters will have to buy more T hiding rooms to support their assets.

The bill could be adopted by the Senate next week and could possibly increase the amount of US Treasury bills held by stablecoin issuers such as Tether and Circle, the latter made its debut Thursday in the NYSE. They together have $ 166 billion in American treasury vouchers, according to a Bath & Company’s Financial Services Practice.

The Stablescoin market, currently around $ 247 billion, according to the Coingecko cryptographic data provider, could reach 2 dollars by 2028 if the legislation should adopt, said Standard Charterd. The Secretary of the United States of the Treasury, Scott Bessent, encouraged legislators to adopt legislation to codify federal rules for the floors, arguing that this could lead to an increase in the demand for American public debt. Currently, there are approximately 29 billions of dollars in treasury titles in circulation, of which 6 dollars are invoices.

Red flags

In a research note in April, JP Morgan analysts estimated that stablecoin issuers could become the third buyer of Treasury bills in the coming years.

The Treasury Borrowing Advisory Committee, a group of banks and investors who advise the government on its funding, said in a study in April that the growth of the stable market to the detriment of bank deposits could reduce the demand of banks for US Treasury bills, as well as an impact on credit growth.

“If (stablecoin issuers) must quickly move these treasury bills, or the market requires that this can create credit cracks,” said Mark Hays, associate director of cryptocurrency and financial technology among Americans for financial reform. Hays said it presupposes that stablecoins become more widely used after adoption by legislation.

The money market funds, which invest in a short -term debt, could be affected. The expert on the money market Pete Crane, president of Crane Data, said that money funds closely look at the stables, but that market size should become much more important to create concerns about financial stability.

“Treasury bills are normally so short (at maturity) that people are not concerned with price movements, but of course, in the event of rapid liquidation, the price will decrease,” he said. Problems with Stablecoins have not so far been large enough to cause systemic problems, but calculation could change if federal legislation was to stimulate generalized adoption.

In 2022, a collapse in the cryptographic markets sent a stablecoin of Tether under his dollar ankle, which caused any impact on the treasury market. At the time, the Secretary of the United States Treasury, Janet Yellen, said that Stablecoins like Tether did not pose a systemic risk for the financial system because they were too small. In 2023, the USD part of Circle also lost its ankle in dollars after the company revealed that it held part of its reserves at Silicon Valley Bank failed. The circle and the attachment refused comments.

Potential elevation to market

However, some maintain that there could be advantages of growing demand for public debt. “If we adopt the stable legislation, the dollars will be exported worldwide, which will extend the force of the dollar as a global reserve currency,” said Matt Hougan, director of investments at Bitwise Asset Management, an asset manager Crypto.

Roger Hallam, a global pricing manager in Vanguard, said that the higher demand for short-term public debt instruments could encourage the Treasury Department to increase the T-Bill issue, rather than on long-standing debt, to cover its deficit financing needs. The long -term debt yields have recently increased, partly due to the country’s budgetary health concerns.

“You can choose to issue more invoices to respond to this request, which relieved some of the tensions that we currently see on the market … Around the scale of future emissions and which will buy all these obligations,” said Hallam.