🚀 CBDCs Need to Be the Main Digital Currency, Says US Treasury
posted 31 Oct 2024
Digital assets played a large part in the US Treasury's 2024 Q4 report.
In the 132-page presentation to the Treasury Borrowing Advisory Committee (TBAC), the agency introduced different financial aspects, including the rapid growth of stablecoins, tokenization, and their use in the Treasury Market.
Overall, the agency drew attention to crypto market volatility, adding that “digital asset markets have limited access to traditional safe-haven or risk-hedging instruments like Treasuries.”
Referring to the benefits and the promise of tokenized financial markets, the Treasury says the technology offers new operational and economic efficiencies. However, the question is how it will be used.
The Treasury believes distributed ledgers need to be controlled by central banks, suggesting that Central Bank Digital Currencies may replace stablecoins.
“Central Bank Digital Currencies (CBDCs) may need to replace stablecoins as the primary form of digital currency underpinning tokenized transactions,” the agency concluded.
In the 132-page presentation to the Treasury Borrowing Advisory Committee (TBAC), the agency introduced different financial aspects, including the rapid growth of stablecoins, tokenization, and their use in the Treasury Market.
Tether uses US Treasury bills to back USDT, its dollar-pegged stablecoin. Source: treasury.gov
According to the US Treasury, the growth of stablecoins has led to an increased demand for government bonds.
We estimate that $120bn in total stablecoin collateral is directly invested in Treasuries,the report mentions.
Next, the agency predicts that the stablecoin market will continue to grow, raising concerns about financial instability. The Treasury said the fate of the sector will be determined by medium-term regulatory and policy choices.
Overall, the agency drew attention to crypto market volatility, adding that “digital asset markets have limited access to traditional safe-haven or risk-hedging instruments like Treasuries.”
Referring to the benefits and the promise of tokenized financial markets, the Treasury says the technology offers new operational and economic efficiencies. However, the question is how it will be used.
The Treasury believes distributed ledgers need to be controlled by central banks, suggesting that Central Bank Digital Currencies may replace stablecoins.
“Central Bank Digital Currencies (CBDCs) may need to replace stablecoins as the primary form of digital currency underpinning tokenized transactions,” the agency concluded.
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