U.S. Treasury Secretary Scott Bessent anticipates the stablecoin market to reach $3.7 trillion, which would represent 64% of all U.S. short-term treasuries. This scale could distort the treasury yield market due to an insatiable appetite for debt from stablecoins. Historical bank runs in 2008 experienced serious systemic issues, prompting Fed bailouts, while Tether demonstrated resilience during the 2022 crypto bank run by redeeming 10% of its supply without needing a bailout. The situation raises questions about U.S. fiscal strategies.
In the next several years, U.S. Treasury Secretary Scott Bessent expects the stablecoin market to be $3.7 trillion in size. If that sum represented short-term treasuries, it would represent 64% of all U.S. short-term treasuries outstanding.
Bessent's figure would completely distort the treasury yield market. It represents an insatiable appetite of debt stemming from stablecoins, which positions the U.S. in a unique situation.
In 2008, bank runs were getting a little out of control. Institutions like Washington Mutual saw about 10% of its deposits leave its bank in 16 days, prompting a Fed response.
In contrast to this, crypto had its own bank run in 2022. Tether saw 10% of its total supply of stablecoins redeemed in the span of 48 hours, meeting all those redemptions.
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