Stablecoin Giants to Lose $625 Million in Revenue After Fed Slashed Interest Rates By 50 Basis Po...

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.

/2 The top 5 centralised stablecoins hold US Treasury Bills of nearly $125bn, accounting for ~80% of their reserves.As a result, the decision to cut interest rates for the first time since March 2020 is set to result in $625mn in lost annual interest income for each 50bps cut. pic.twitter.com/KskNAhCdk8

— CCData (@CCData_io) September 27, 2024

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.