PANews reported on October 31 that according to Decrypt, the U.S. Treasury Department expressed concerns about the growth of the stablecoin market and believed that stablecoins issued by the private sector should eventually be replaced by state-backed central bank digital currencies (CBDCs), according to a report released by the U.S. Treasury Department on Wednesday. The report, written by the Treasury Department's Debt Management Office, stated: "Similar to the way that 'wildcat' currencies issued by the private sector in the late 19th century were replaced by government-backed central currencies, central bank digital currencies (CBDCs) may need to replace stablecoins and become the main form of digital currency to support tokenized transactions."
Stablecoins take up a large part of the 132-page report on the Treasury Department’s financial situation in the fourth quarter of 2024. The report makes extensive mention of large purchases of U.S. Treasuries by stablecoin issuers such as Tether and Circle. The Treasury Department estimates that $120 billion worth of U.S. Treasuries have been purchased as collateral for yield-generating stablecoins. Of this, nearly $81 billion was purchased by Tether, the company behind USDT, the largest stablecoin in the crypto market.
While many stablecoin supporters argue that dollar-backed stablecoins reinforce the dollar’s strength by increasing demand for U.S. Treasuries, the Treasury Department doesn’t seem convinced. Wednesday’s report focused on the “widespread phenomenon” of stablecoins decoupling or collapsing entirely in recent years, which the Treasury believes could lead to disaster if U.S. Treasuries become increasingly integrated with the stablecoin industry.
