During Tuesday’s meeting of the US Treasury’s Borrowing Advisory Committee, the members explored the topic of tokenizing US Treasuries. It discussed the impact of stablecoins on the demand for short term Treasuries, concluding that the effect is marginal. The presentation covered the use of tokenized Treasuries as a safe haven in the digital asset sector. And finally, it focused on how blockchain and tokenization could improve Treasury market operations, including the benefits, costs and risks.
Our calculations show the combined US Treasury and repo holdings of the two largest stablecoins, Tether and USDC as $120 billion in June 2024. Putting them on a list of the largest foreign country investors would rank them (combined) in the eighteenth spot. Yet given the total size of Treasury issuance, the figure is indeed marginal.
However, the presentation raised the concern that a collapse of a “major stablecoin like Tether could lead to a fire sale of short-dated Treasuries.”
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