Stablecoin issuers have emerged as one of the largest holders of US treasuries, ranking 18th in the world, according to a report by Bernstein. This development is driven by the increasing popularity of stablecoins in the crypto market. Stablecoins are digital currencies pegged to a stable asset like the US dollar, which is backed by US treasuries, hence the significant investment in these securities.
The explosion of stablecoins has been attributed to a growing demand for digital assets that have low volatility compared to traditional cryptocurrencies like Bitcoin and Ethereum. This surge in demand has led to a corresponding increase in the reserves of stablecoins, which have to be backed by assets of equal value. The majority of these reserves are held in US treasuries, which are considered a safe and stable investment.
Stablecoin issuers have now surpassed many countries in their holdings of US treasuries. This has raised concerns about the potential implications on the US treasury market, and its susceptibility to the volatility of the crypto market. As the influence of stablecoins continues to grow, regulators are expected to keep a keen eye on these developments and possibly introduce measures to manage any associated risks.
