Revenue for Stablecoin Issuers Projected to Decline by $1.56 Billion by Year-End

The U.S. Federal Reserve’s choice to reduce interest rates may adversely affect the earnings of the largest centralized stablecoin issuers, which possess around $125 billion in U.S. Treasuries as collateral for their holdings.

A recent report from CCData indicates that 80.2% of the assets supporting the five largest centralized stablecoins are U.S. Treasuries. Their profitability is closely tied to that of government bonds, which declined following the Fed’s decision to lower interest rates.

The total reserves of stablecoin issuers in U.S. Treasuries amount to $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.

Analysts at CCData project that the issuers’ revenues could decrease by roughly $625 million if interest rates were to drop by 50 basis points. Data from the FedWatch service suggests that the federal funds rate is anticipated to decrease by 75 basis points by the end of 2024, with reductions of 50 basis points in November and 25 basis points in December. Consequently, by year-end, the issuers of the five largest stablecoins might experience a revenue deficit of approximately $1.56 billion.

By mid-2024, the market capitalization of stablecoins reached $164 billion. In September, this figure increased to $172 billion. The primary driver of this growth was the rising interest in assets outside the crypto markets.

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