VBIT Hong Kong
The Fed announced its first rate cut since March 2020, with significant implications for the five largest centralised stablecoins' revenue. CCData's 27 September report estimated that they held about $125 billion in US Treasuries and that each 50-basis-point cut could reduce interest income by around $625 million.
The report said US Treasuries represented 80.2% of major stablecoin reserves, making revenue directly sensitive to falling rates.
Expectations of further rate cuts
CME's FedWatch data showed expectations of another 75 basis points of cuts by the end of 2024: 50 in November and 25 in December. If realised, the report estimated a further $937.5 million reduction in stablecoin income, bringing the potential combined impact of Fed easing to $1.5625 billion.
Effects on major stablecoins
Tether's USDT held the largest Treasury reserves, with $93.2 billion in Treasury bills and repurchase agreements. Tether reported $5.2 billion in net profit for the first half of 2024, largely supported by higher interest rates.
Circle's USDC followed with $28.7 billion in Treasuries through its Circle Reserve Fund. FDUSD, PYUSD and TUSD held $1.83 billion, $634 million and $502 million respectively.
Falling rates were expected to compress these stablecoins' margins. Despite that pressure, the market remained resilient: CCData recorded a 1.50% rise in September market capitalisation to $172 billion, its twelfth consecutive monthly increase. The total remained below its level before the May 2022 Terra Luna depeg.
Stablecoin trading volume declines
Centralised exchange volume fell 39.4% to $683 billion as of 23 September. USDT retained its lead with 77.2% of volume on centralised exchanges, followed by FDUSD at 11.6% and USDC at 10.9%.
Three major Japanese banks test cross-border stablecoin transfers
Reports said Japan's three largest banks were launching Project Pax to accelerate international settlement with stablecoins issued through Progmat, a blockchain platform backed by SBI Holdings and Japan Exchange Group. Participating banks included MUFG, SMBC and Mizuho.
The trial also involved Datachain and TOKI, exploring cross-chain technology for faster, more efficient transactions. Ripple CEO Brad Garlinghouse also said the company was advancing stablecoin issuance in Japan.
