Stablecoin Issuers’ Income to Fall by $1.56 Billion by Year-End

The U.S. Federal Reserve’s decision to cut interest rates could negatively impact revenues of the largest centralized stablecoin issuers, which hold approximately $125 billion in U.S. Treasuries as collateral for their assets.

According to a recent CCData report, 80.2% of the assets backing the five largest centralized stablecoins are U.S. Treasuries. Their profitability is directly dependent on that of government bonds, which fell after the Fed’s decision to cut interest rates.

The total amount of stablecoin issuers’ reserves in U.S. Treasuries is $125 billion:

• Tether (USDT) holds $93.2 billion;
• USD Coin (USDC) holds $28.7 billion;
• First Digital USD (FDUSD) holds $1.83 billion;
• PayPal USD (PYUSD) holds $634 million;
• TrueUSD (TUSD) holds $502 million.

CCData analysts estimate that the issuers’ revenues would decline by approximately $625 million if interest rates fell by 50 bps. According to data from the FedWatc service, the federal funds rate is expected to fall 75 bps by the end of 2024, 50 bps in November, and 25 bps in December. Thus, by the end of the year, the issuers of the five largest stablecoins may see a revenue shortfall of about $1.56 billion.

In mid-2024, the stablecoin market capitalization reached $164 billion. In September, this metric rose to $172 billion. The main catalyst for its development was the growing interest in assets beyond the crypto markets.

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