Tether, the largest stablecoin in the cryptocurrency market, discussed how its leverage of U.S. treasury bills creates a steady demand for U.S. national debt as a backup of the USDT issuance. The company has exposure to almost $73 billion in U.S. debt, held directly, indirectly, or as collateral for reverse repo operations.
Tether U.S. Treasury Exposure a ‘Call Option’
Tether, the largest stablecoin company in the cryptocurrency market, has recently discussed its exposure to U.S. treasuries and its effects on the entire crypto ecosystem.
In a recent article titled “Tether USDT and U.S. Treasury Dynamics,” the organization reported it held almost $73 billion in U.S. debt directly, indirectly, or as collateral in reverse repo operations, making it the number 22 holder of U.S. Treasuries. Tether CTO Paolo Ardoino stated that the company held more U.S. debt than nations like the United Arab Emirates, Mexico, Australia, and Spain.
For Tether, this sets a trust precedent in the U.S. economy, as the company endorses the function of national debt bonds as “global reserve assets underpinning capital markets around the globe,” even when interest in this debt has been affected by geopolitical issues.
Even if China and other countries have shed a significant amount of U.S. debt during the last six years, Tether explains that digital dollars represent a “call option” on the economy of the U.S. and its debt, as the demand for dollars is quickly translated as a demand for U.S. treasuries to become collateral of the USDT issued.
Stablecoins and Financial Stability
Tether details that its involvement as a supplier of dollar-equivalent USDT tokens in emerging markets around the world contributes to the financial stability of the U.S. while providing a “lifeline” in countries with fiat currencies ravaged by inflation and devaluation, such as Venezuela and Argentina.
As demand for dollar stablecoins rises in different jurisdictions, the issuance of USDT will ramp up to satisfy the demand. Consequently, demand for U.S. debt to serve as collateral for these tokens will also increase.
Tether is able to produce a unique source of treasury demand while strengthening the role of the US dollar globally. As foreign purchasing of treasuries declines, and issuance of US debt is slated to increase, Tether is able to help support US and global financial stability.
What do you think about the role of Tether as a company with a constant demand for U.S. debt? Tell us in the comments section below.