The U.S. financial markets will see increased stablecoin participation because Congress works on passing regulations for dollar-pegged digital tokens. Supporters of the move claim it will establish legitimacy for the sector and increase short-term Treasury demand but critics warn it could introduce market volatility.
The proposed law demands stablecoins to maintain their value through U.S. dollar and short-term Treasury reserves while requiring monthly disclosure reports. The bill would force Tether and Circle to acquire additional Treasuries because they already manage $166 billion in these assets. Standard Chartered projects that the stablecoin market will reach $2 trillion by 2028 if the proposed legislation passes because it currently stands at $247 billion.
The proposed legislation receives skepticism from multiple parties regarding its impact on Treasury market stability. Moody’s Ratings analyst Cristiano Ventricelli explained that unstable confidence in stablecoins combined with regulatory changes and market gossip may trigger rapid asset sales that would decrease Treasury prices and create market instability in fixed-income investments.
The Treasury Borrowing Advisory Committee expressed similar concerns through their April report which showed that rising stablecoin activity could reduce bank Treasury purchases and create tighter credit conditions. Americans for Financial Reform member Mark Hays warned that rapid Treasury sales by stablecoin issuers could trigger credit market restrictions.
Treasury Secretary Scott Bessent supports the bill’s passage because he believes it will enhance federal debt market demand. The Senate plans to vote on the bill during the upcoming week which will establish a new relationship between traditional finance and cryptocurrency markets.
