- Stablecoins are major buyers of U.S. short-term Treasury bills in 2024.
- Bank for International Settlements (BIS) studies show stablecoins impact short-term Treasury yields.
- Stablecoin sales influence Treasury yields more strongly than purchases.
- Growing stablecoin activity may weaken central banks’ control over interest rates.
- Policy changes may raise financial stability risks connected to stablecoin-backed government debt.
Stablecoins have emerged as significant buyers of short-term U.S. Treasury bills in 2024, according to new research by the Bank for International Settlements (BIS). The BIS, often called the “central bank of central banks,” found that stablecoins are now among the top holders of short-term Treasuries, following only two other groups in net purchases so far this year.
The study from BIS highlights that stablecoin issuers surpassed countries like China in short-term Treasury bill holdings. In 2024, stablecoin reserve increases made them the third largest buyers of U.S. Treasury bills. The BIS analysis estimates that a $3.5 billion change in stablecoin Treasury bill holdings could have a measurable influence on short-term Treasury yields.
The BIS report explains that if stablecoin issuers sold $3.5 billion in Treasury bills, yields on these securities would likely rise by 0.06% to 0.08%. The report states, “A similarly sized purchase of Treasuries would result in a decline in Treasury rates of three basis points (-0.03%).” The effect of sales is greater, according to the BIS, because such sales are often urgent and may reflect crisis conditions.
Although stablecoins currently account for a relatively small portion of the Treasury market, the BIS warns that as the sector grows, its influence will increase. This growth brings added financial stability risks, especially if there is a rapid selloff connected to a “run” on stablecoins. Such events could affect short-term interest rates more broadly.
The report also notes that with more stablecoins in circulation, the ability of the U.S. Federal Reserve to manage interest rates could diminish. Historically, during the early 2000s, the Federal Reserve found it difficult to move Treasury rates as intended—a problem known as the “Greenspan Conundrum”—because of heavy foreign holdings. The BIS suggests rising stablecoin investments could create a similar challenge.
The U.K., meanwhile, is considering regulations encouraging stablecoins to invest in longer-term government bonds. This could help lower long-term rates but may make stablecoins riskier and less liquid.
Finally, BIS raises concerns about government influence on monetary tools. If legislation leads stablecoins to buy more government debt, treasury departments may reduce the effectiveness of central bank interest rate policies. The report says that while some may see this as positive, the combined risks of higher debt and geopolitical tensions could threaten financial stability.
For more details, see the full BIS report.
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