New York, Saturday, November 02, 2024- The US Treasury Department recommended that private stablecoins be replaced by a Central Bank Digital Currency (CBDC), citing concerns over the stability of the stablecoin market in its latest report, on October 31.
The Treasury’s 132-page report highlighted the extensive purchase of US Treasury bonds by stablecoin issuers, with Tether and Circle accounting for a combined $120 billion in T-bill holdings, mainly used to collateralize their stablecoins.
Tether alone holds $81 billion in T-bills, making it a significant player in the stablecoin space. However, the Treasury raised alarms about potential market instability, pointing to past depegging and collapses of stablecoins.
If a major stablecoin like Tether were to fail, the department warned it could trigger a “fire sale” of T-bills, posing broader risks to financial markets.
The report emphasized that more than 80% of crypto transactions rely on stablecoins, with Tether’s USDT being the most widely traded cryptocurrency, generating $53 billion in trading volume in the past 24 hours alone.
Despite the growth in stablecoins’ link to traditional finance, the Treasury expressed concerns over their increasing role in financial markets, favoring a state-regulated CBDC to mitigate these risks.
