According to a report by PANews, entities issuing stablecoins, such as Circle and Tether, have invested heavily in U.S. Treasury bonds, surpassing the holdings of several sovereign nations. This substantial allocation of funds into U.S. government debt instruments has the potential to alter the balance of the American economy. Notably, Tether recently disclosed that it holds over $100 billion in U.S. Treasury bills, a figure exceeding the investments of countries like the United Arab Emirates and Germany.
Proponents of cryptocurrencies argue that stablecoins reinforce the global dominance of the U.S. dollar. However, critics raise concerns that the increasing market share of stablecoins could undermine the stability of the traditional banking sector. The primary apprehension stems from the possibility that stablecoins may withdraw funds from bank deposits and redirect them into their own platforms, thereby diminishing banks’ capacity to extend credit. Since bank deposits form the foundation for lending activities, a reduction in deposit volumes could pose risks to the broader credit system.
The expanding investment footprint of stablecoins and their consequent influence on the financial system have emerged as significant sources of concern for the U.S. economy and banking industry. This evolving landscape has intensified calls for enhanced regulatory oversight and stringent financial safeguards to protect stakeholders and mitigate potential systemic risks. Implementing such measures is seen as crucial to preserving economic stability amid the growing prominence of stablecoins in global finance.
Source: binance
