Bounties

Will stablecoins become the world's largest owners of US Treasuries?
💵 

It seems possible that crypto stablecoins become the largest holders of US Treasuries in the world. Putting up $1000 for the one layer deeper analysis to support or debunk that thesis.

@bountybot

Intriguing question posed in this thread:

Can stablecoins be a critical sink for U.S. treasuries?

https://warpcast.com/fehrsam/0xd1649c39

my estimate below 👇

Full report here: https://github.com/PaulApivat/python/blob/master/defi/stablecoins/stablecoin.md

read on for a tl;dr breakdown

Moving data 
@Exponent_cx
 🇹🇭 🧙‍♂️ 🦇 🔊

 @paulapivat on twtr

rwa.xyz provides a stablecoin directory with several attributes like market cap, pegged currency and underlying assets. This gives us a starting point for investigating U.S. treasury holdings by stablecoins.

For more exact figures, we go directly to attestation reports provided by independent 3rd party accounting firms. The summed figure of our sample of stablecoin projects found $82.5 billion in US Treasuries or, roughly 65% of the value for stable coins in circulation.

Combing thru various "attestation" reports, we found Pax Dollar (Paxos) as the first stablecoin to label "US Treasury" in their attestation reports, followed by Gemini Dollar (GUSD). Then later, USDC and UDST followed suit. 

In 2024, it is standard practice.

Here's a breakdown of how the proportion of stablecoin market cap to US Treasury holdings as evolved since roughly 2018:

The proportion of T-Bills compared to stablecoin market cap has changed significantly. <20% --> ~ 40%

This shift indicates a move towards greater security and reliability within the stablecoin ecosystem

The amount of t-bills backing stablecoins has 4X ($19bn to $82bn).

To get a feel for the overall market cap growth of stablecoins, as a whole, we use DeFiLlama, filtering for the projects we studied above (with US Treasury attestions):

The CAGR for stablecoins marketcap has grown at approx 36.5% from 2021-2024 and US Treasury Bill reserves has grown at approx 27% from 2018-2024.

w the present stablecoin market at approx $140bn & t-bills at $82bn, 
our estimates for the next 10 yrs:

Worst 
Stablecoin mkt cap: $1.6 trillion
T-bills:   $518 billion

Base 
Stablecoin mkt cap: $3.1 trillion
T-bills:   $895 billion

Best 
Stablecoin mkt cap: $6.0 trillion
T-bills:   $1.5 trillion

Who are the largest nation state holders of U.S. treasuries today? 
Can stablecoins overtake them in 10 yrs?

worst: stablecoin US tbill holding grows to $518 bns, ahead of Luxembourg today

base: stablecoin US tbill holdings grow to $895 bns, ahead of China today.

best: we grow to $1.5 trillion, overtaking Japan.

Two X-factors to watch for 👀 

1. The rise of Tokenized Treasuries - no more manual off-chain attestation, this trend will amplify stablecoin's holdings of US treasuries

2. The rise of Synthetic dollars - let's use internet native currencies; this could dampen the adoption of US treasuries by stablecoins

Can stablecoins be a critical sink for U.S. treasuries?

We think they can and they will be critical - just a matter of magnitude.

Old enough to remember Terra Luna's death spiral 💀 
one positive that came out of that was greater scrutiny around stablecoin reserve backing, begging the question:

How much of the top stablecoins are backed by U.S. Treasuries ?