Is the U.S. Cutting Off Stablecoin Issuers from Treasury Bonds?

If the legislation moves forward unchanged, it could drain hundreds of millions from U.S. Treasury markets, as crypto firms would be cut off from one of their primary safe-haven investment strategies. More concerningly, such a move might weaken the dollar’s dominance on the global stage and destabilize the broader U.S. debt infrastructure.

The largest stablecoins today are built overseas, and the largest source of demand is overseas — this is not changing no matter what. The net effect of a continued hostile regulatory stance towards stablecoins will only be to regulate ourselves out of the picture like Europe with AI,

Vance notes.

His stance is clear: as long as overly strict regulations aren’t enforced, the U.S. dollar will remain the backbone of the stablecoin market, with most issuers committed to dollar-based tokens. Meanwhile, U.S. Treasuries will continue to be a preferred instrument for generating returns on reserves.

Yet, Avichal Garg, co-founder of Electric Capital, pushed back, arguing that the bill is not a blanket ban on all foreign stablecoin issuers but rather a targeted measure against under-collateralized dollar-pegged tokens. The main requirement? Full compliance with U.S. regulations. 

Read on: The Origins of the First Stablecoins