Treasury Report: Stablecoins Hold $120B in T-Bills, Could Give Way to CBDCs

The U.S. Treasury Department’s latest report reveals growing interconnections between stablecoins and traditional financial markets, with stablecoin issuers now holding approximately $120 billion in Treasury bills. The findings, released Wednesday as part of the Treasury Borrowing Advisory Committee’s quarterly meeting minutes, suggest this trend has led to a “modest increase” in demand for short-dated Treasury securities.

Tether (USDT), the largest stablecoin issuer, accounts for $81 billion of these holdings, surpassing several nations’ Treasury holdings. While stablecoin advocates argue this increased demand strengthens the dollar’s position, Treasury officials express concerns about potential risks.

The report warns that a collapse of a major stablecoin could trigger a “fire-sale” of Treasury holdings, potentially destabilizing the T-bills market. Although stablecoins currently represent a marginal segment of the market, their growing influence raises concerns about increased vulnerability to market runs.

Looking ahead, the Treasury committee suggests that Central Bank Digital Currencies (CBDCs) might need to replace private stablecoins as the primary form of digital currency for tokenized transactions. The committee also explored the potential benefits of Treasury market tokenization, recommending that any such implementation would require a “privately controlled and permissioned blockchain managed by a trusted government authority.”

The findings come as the total stablecoin market capitalization approaches $180 billion, with stablecoins now facilitating over 80% of all cryptocurrency transactions, according to Treasury estimates.