Stablecoin Industry Will Weather Significant Losses in Interest Income Following the Federal Reserve's Latest Rate Cut, CCData Report Shows

The digital asset data and index provider notes that the vast majority of the top five stablecoin issuers' reserves are in US Treasury Bills

The Federal Reserve’s latest rate cut will result in significant losses in interest income for the stablecoin industry, according to a new report from CCData.

The digital asset data and index provider notes in its latest report on stablecoins and central bank digital currencies (CBDCs) that the vast majority of the top five stablecoin issuers’ reserves are in US Treasury Bills, making interest rates a key factor in their business model.

The firm estimates a loss of about $632 million for the major stablecoin issuers due to lower interest rates and, thus, lower yielding T-Bills.

“With the top five centralized stablecoins holding combined US Treasury Bills of nearly $125bn, which accounts for nearly 80.2% of their reserves, the recent Federal Reserve decision to cut interest rates for the first time since March 2020 is set to result in $625mn in lost annual interest income for each 50 bps (basis points) cut.

According to their latest attestation reports, Tether holds nearly $93.2bn in US Treasury bills and repurchase agreements, the majority of which contributed to the net profit of $5.2bn in H1 2024. The second largest stablecoin, USDC, holds $28.7bn in US Treasury bills through their Circle Reserve Fund, while FDUSD, PYUSD and TUSD hold US Treasury assets valued at $1.83bn, $634mn and $502mn, respectively.”

Apparent in an effort to diversify its investments, Tether (USDT), the leading stablecoin issuer, has invested over $112 million in an agroindustrial company that was founded in Argentina. In Q4 of 2023, a large portion of Tether’s record-breaking profit was attributed to the yield on its US government bond holdings.

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