Fed’s Rate Cuts to Slash $625M in Stablecoin Interest Income, CCData Reports
Ruholamin Haqshanas is a contributing crypto writer for CryptoNews. He is a crypto and finance journalist with over four years of experience. Ruholamin has been featured in several high-profile crypto...
The United States Federal Reserve’s recent decision to cut interest rates for the first time since March 2020 is expected to impact the income streams of the top five centralized stablecoins.
According to a report by CCData released on September 27, these stablecoins, which collectively hold nearly $125 billion in U.S. Treasury bills, could lose approximately $625 million in interest income for each 50-basis-point (bps) rate cut.
The report reveals that Treasury bills constitute 80.2% of the reserves held by major stablecoins.
As a result, any reduction in interest rates directly affects their revenue.
Data from CME Group’s FedWatch tool indicates that the market anticipates a total of 75 bps in rate cuts by the end of 2024, including a 50-bps cut in November and an additional 25-bps cut in December.
If these predictions materialize, stablecoins could face an additional revenue loss of $937.5 million, bringing the total potential loss from the Fed’s easing policy to $1.5625 billion.
Among the affected stablecoins, Tether’s USDT holds the largest share of Treasury-backed reserves, amounting to $93.2 billion in T-bills and repurchase agreements.
Tether reported a net profit of $5.2 billion in the first half of 2024, largely driven by higher interest rates.
Circle’s USD Coin (USDC) follows with $28.7 billion in Treasury holdings through its Circle Reserve Fund.
Other stablecoins such as First Digital USD (FDUSD), PayPal USD (PYUSD), and TrueUSD (TUSD) hold smaller Treasury positions of $1.83 billion, $634 million, and $502 million,
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