https://www.nytimes.com/2026/03/08/business/stablecoins-crypto-treasuries-risks.html
A Crypto Coin Is Gobbling Up U.S. Treasuries
A new generation of cryptocurrency, pegged to the dollar, is growing rapidly, promising faster payments and potentially lower interest rates. But regulators and bankers warn of risks.
By Talmon Joseph Smith, The New York Times, March 8, 2026
Cryptocurrencies were designed to be a hedge against the U.S. dollar, which crypto creators viewed as an unreliable currency. Yet one of the fastest-growing crypto coins has risen in popularity precisely because it’s pegged to the greenback.
Stablecoins, as they are known, are also backed by U.S. government debt, known as Treasuries…
Stablecoins have grown to $300 billion in market value from roughly $20 billion in 2020. The Federal Reserve estimates they could be worth $3 trillion in five years.
Because stablecoins use Treasuries as the primary collateral to create this cashlike safety, cryptocurrencies have effectively flooded into the Treasury market, the central artery of the U.S.-led global financial network. Stablecoin-issuing companies, like Circle and Tether, now hold more Treasury debt than major U.S. government creditors like Saudi Arabia and South Korea…
Stablecoins can already be bought on retail cryptocurrency exchanges, like Coinbase. And most issuers do market a fully redeemable one-to-one backing by U.S. dollars. But they have little legal obligation to immediately redeem coins for dollars. And unlike bank deposits, stablecoins are not protected by the Federal Deposit Insurance Corporation.
For financial economists, a primary near-term concern is that at their current pace of growth, stablecoins could become a sizable fraction of the roughly $7 trillion Treasury bill market…[end quote]
How are stablecoins different than money market funds, which are also pegged to a $1 per share value but not FDIC insured? Retail government money market fund assets increased to $1.95 trillion, while institutional government money market fund assets rose to $4.48 trillion. One small money market fund “broke the buck” in 2008 but the Fed came to the rescue.
Money market funds are highly liquid while stablecoins are not necessarily liquid. Tether and Circle saw their coins “de-peg” from their $1 value in 2022 and 2023 when customers rushed en masse to withdraw their holdings during a collapse of crypto coins and platforms.
If stablecoins reach $3 Trillion they could have an impact on interest rates. What could go wrong if they are not regulated or FDIC insured?
Wendy