The rise of stablecoins has led to increased demand for short-term US Treasury bonds, according to a report from the Treasury Department.
The department estimates that stablecoin issuers have invested $120 billion in debt securities.
“Stablecoins play an integral role as intermediaries in transactions on digital asset markets. More than 80% of all cryptocurrency operations currently use ‘stablecoins’ as one stage of the transaction,” the Treasury report states.
The department also expressed its views on the future of these instruments, stating that while it expects further growth, stablecoins may face obstacles.
“Medium-term regulatory and policy decisions will determine the fate of this ‘private currency.’ History shows that such products, when non-compliant, lead to financial instability and are generally highly undesirable,” the report asserts.
The department believes that structural demand for Treasury bonds may increase as the cryptocurrency market grows.
In August, Tether reported direct investments in US debt securities amounting to $80.9 billion, with the figure reaching $97.6 billion when including cash and other equivalents.