Treasury's New Rules Threaten Stablecoin Issuers' Liquidity

The US Treasury's new rules for borrowing against Treasury securities may have a ripple effect on the crypto market, particularly for stablecoin issuers.

Stablecoins, such as those backed by the US dollar, rely on Treasury securities to back their tokens. These securities are often used to provide liquidity for investors and to facilitate transactions.

However, the new rules, set to take effect by December 31, 2023, and June 30, 2027, require certain trades involving Treasury securities to go through a central clearinghouse. This means that stablecoin issuers will need to adapt to new requirements for trading and borrowing, which may increase costs and reduce availability.

According to Commissioner Mark Uyeda, the SEC does not intend to extend the deadlines for implementing these new rules. The clearinghouse will provide a safety net for trades, but it will also require participants to post collateral, which can be a challenge for some issuers.

The SEC's requirements cover specified trades involving clearing members, rather than every purchase of a Treasury security. The changes aim to reduce risk and increase transparency in the market, but they may have unintended consequences for stablecoin issuers and their customers.