Hayes: FIMA Facility Could Fuel Bitcoin Rally

Arthur Hayes has proposed an alternative scenario for Japan to strengthen its currency without forcing the Bank of Japan into aggressive tightening. Instead, Japan could use the Federal Reserve's Foreign and International Monetary Authorities (FIMA) Repo Facility to obtain dollars for yen.

The FIMA facility allows approved foreign central banks and other monetary authorities to temporarily exchange US Treasury securities held at the Federal Reserve Bank of New York for dollars. Japan could then sell these dollars in the foreign-exchange market, supporting its currency while drawing dollar liquidity against assets it already holds.

Hayes estimates that Japanese government holdings and assets associated with the Government Pension Investment Fund could provide roughly $1.37 trillion of Treasury collateral. However, this amount may not be readily available for use under the FIMA facility, as only a small portion of Japan's foreign-asset holdings are US Treasuries.

For Hayes' thesis to become actionable, the Fed would need to make significant changes to its rules and guidelines, including expanding eligibility to include pension institutions like GPIF. If this were to happen, it could lead to persistent dollar liquidity expansion, which Hayes believes would act as a catalyst for Bitcoin.