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Stablecoin issuers like Tether Holdings Ltd. (CRYPTO: USDT) are becoming increasingly significant in the U.S. Treasury market, traditionally dominated by more secure and conventional financial entities.
What Happened: Tether, the largest stablecoin issuer, now holds $81 billion in Treasury bills, as it seeks the safest assets to back its digital tokens.
This trend is seen by crypto advocates as a bridge to better relations with the U.S. government.
Tether has claimed its investments could support both U.S. and global financial stability.
Former House Speaker Paul Ryan even suggested stablecoins might help “stave off a U.S. debt crisis.”
However, experts like Joseph Gagnon from the Peterson Institute caution against overhyping this development.
While Tether’s holdings are substantial, they represent just 1% of Treasury bill purchases, dwarfed by the $6.19 trillion money-market mutual fund industry and Berkshire Hathaway’s $234 billion T-bill holdings.
The future influence of stablecoins hinges on continued crypto growth and possible Congressional regulation requiring stablecoins to be backed by high-quality liquid assets (HQLA).
Why It Matters: Currently, stablecoins are mainly used in crypto markets as a dollar substitute, but their role is expanding in emerging economies as protection against currency devaluation.
Despite skepticism about their overall market impact, Tether CEO Paolo Ardoino is confident his firm will soon become the largest holder of T-bills.
This marks a significant shift from Tether’s early days, when its reserve practices were heavily scrutinized.
Tether’s growing influence has been supported by its partnership with Cantor Fitzgerald LP, which verified Tether’s reserves, ensuring they were fully backed.
Cantor Fitzgerald’s CEO, Howard Lutnick, highlighted Tether's role in financing U.S. debt, emphasizing its importance in the current economic landscape.
Yet, as Mark Sobel, a former Treasury official, notes, while Tether’s contributions are notable, they remain small in the context of the broader U.S. debt market.
“I'm sure there are much bigger fish to fry for the Treasury,” Sobel commented.
As the intersection of crypto and traditional finance deepens, all eyes will be on Benzinga’s Future of Digital Assets conference on Nov. 19.
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Posted In: $USDT
