The Fed has not stopped at traditional finance. Stablecoins have also faced criticism in the report. As of November 2024, the market for these digital assets has grown to $170 billion, barely reaching its peak in April 2022.
But the Fed called stablecoins 'structurally vulnerable to runs' and criticized the lack of a solid federal regulatory framework to support them, even though there are high hopes for real regulation to come with Donald Trump. But the Fed is not the biggest fan of Trump, and there are good reasons for that. Trump has criticized their decisions and mocked them for years, both in office and out.
Meanwhile, the bond markets are chaotic. The yield on 10-year Treasury bonds has sharply increased in recent months, even though the Fed has cut rates by 75 basis points this year. The Treasury yield premium (mostly what investors require for holding long-term securities) is near its highest level since 2010. The volatility of interest rates is also off the charts due to uncertainty regarding economic growth, inflation, and the endless flow of government debt. The Fed noted that while financing risks have decreased since its last report, they are still 'noticeable.' The bond market, with its sharp fluctuations and rapid yields, does not particularly calm anyone's nerves. Volatility remains above historical norms, indicating that economic prospects are far from stable.
