The Federal Reserve’s 50 basis points rate cut earlier this month is set to cost lading stablecoin issuers around $625 million per month, as the interest earned on the reserves backing these stablecoins dropped as a result.
That’s according to CCData’s latest Stablecoins & CBDCs report, which details that the five largest centralized stablecoins – USDT, USDC, FDUSD, PYUSD, and TUSD – collectively hold $125 billion in U.S. Treasury bills, and each 50 basis point rate cut could reduce their interest income by $625 million per year.
The Federal Reserve’s interest rate cut – the first in more than four years -was unusually large and signaled that the central bank believes it’s winning its battle against inflation, which according to TradingEconomics plunged from 9.1% in June 2022 to 2.5% in August of this year.
Their latest attestation reports show Tether holds nearly $93.2 billion in US Treasury bills and repurchase agreements, which contributed to the majority of $5.2 billion net profit in the first half of the year. USDC, the second-largest stablecoins, holds $28.7 billion in US Treasury bills via the Circle Reserve Fund, while FDUSD, PYUSD, and TUSD hold US Treasury assets worth $1.83 billion, $634 million and $502 million, respectively.
CCData’s report further details that in September, the stablecoin market saw a continued upward trend, marking the twelfth consecutive month of growth in its total market capitalization. Rising by 1.50%, the stablecoin market cap reached $172 billion.
Despite this steady increase, the market still remains below its pre-May 2022 levels, when the Terra Luna de-peg caused significant disruptions. While market capitalization climbed, stablecoin trading volumes took a downturn, with $683 billion in volume recorded as of the 23rd of September.
Featured image via Pixabay.
