Dollar Stablecoin Boom Sparks Treasury Market Concerns
Dollar-linked stablecoins have grown to about $300 billion in circulation, prompting a Bank of England policymaker to warn that their expansion could increase demand for US Treasurys while creating new risks during periods of heavy redemptions.
Carolyn Wilkins, an external member of the central bank's Financial Policy Committee, said dollar stablecoins already have a 'considerable first-mover advantage.' About 98% of stablecoin value is denominated in dollars, according to figures cited in her speech.
The same reserve structure that sends money into Treasury bills during stablecoin growth can create selling pressure when users redeem tokens. Wilkins warned that several large issuers selling Treasury bills at the same time could worsen changes in yields and liquidity if the government-debt market were already under strain.