In the United States Treasury market, stablecoin issuers like Tether (USDT) and Circle have outperformed key traditional financial firms by gaining a sizeable market share, as reported by Cointelegraph.
As of May 2022, different stablecoin providers held $80 billion in short-term U.S. government debt collectively, according to a report by the investment bank JP Morgan published on August 16. Tether, Circle, and other stablecoin companies controlled more T-bills than Warren Buffett’s massive investment company Berkshire Hathaway did in total, accounting for 2% of the market for U.S. Treasury bills.
According to the data, stablecoin issuers have outpaced prime market money market funds (MMFs) and offshore MMFs in terms of the percentage of Treasury bills they have invested in.
Treasury bills are financial instruments that are frequently utilised by businesses as a cash equivalent on company balance sheets since they are thought of as low-risk assets. The asset-backed stablecoins, Tether and USD Coin (USDC), are issued by Tether and Circle, who also promised to reduce their reliance on commercial paper earlier this year, Cointelegraph noted.
The decision was made in the midst of ambiguity around algorithmic stablecoins caused by TerraUSD (formerly UST) losing its peg to the US dollar in May 2022. The 1:1 peg is guaranteed by holding cash and common cash equivalents, as opposed to algorithmic stablecoins, which rely on algorithms and smart contracts to support their U.S. dollar backing, Cointelegraph said.
As was previously reported, the market cap of USDC has increased noticeably, while Tether’s market share has been declining since May. The events of the previous few months have accelerated the dynamic that has been slowly eroding market confidence in Tether as a stablecoin, according to JPMorgan. The bank claims that the “better transparency and asset quality of USD Coin’s reserve assets” have been one of the main forces for the decision.
(With insights from Cointelegraph)
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