The advisory group of the U.S. Treasury recently released a report stating that tokenizing U.S. Treasuries and other assets could bring great potential but may require a degree of 'central control' and even proposed replacing stablecoins with 'Central Bank Digital Currency (CBDC),' raising concerns in the cryptocurrency industry.
The comments were made by the 'Treasury Borrowing Advisory Committee (TBAC),' whose members include executives from well-known Wall Street institutions such as BlackRock, Citi, and Goldman Sachs, specifically providing bond issuance advice to the Treasury.
The prospects for 'tokenization' of U.S. Treasuries are promising.
TBAC pointed out in a briefing on Wednesday:
Tokenization has the potential to apply programmable and interoperable distributed ledger technology to more traditional financial assets.
The committee emphasizes that this technology can achieve instant settlement and transparent clearing, thereby 'reducing the risk of settlement failures.' They believe that even minor improvements in the vast U.S. Treasury market could yield significant impacts. However, the report also cautions to proceed with caution and suggests 'developing a privately authorized blockchain managed by private or public institutions.'
The report states: 'Future developments should be led by a trusted central authority and gain broad support from the private sector.'
Stablecoin risks.
Additionally, the advisory group also discussed the rise of stablecoins, noting that many stablecoins today choose to hold large amounts of short-term U.S. Treasuries as collateral assets, and future regulatory policies may further encourage this practice. The report specifically warns of the potential risks of stablecoins like USDT:
If major stablecoins like Tether collapse, it could lead to a rapid sell-off of the U.S. Treasuries they hold, triggering a 'domino effect' of sell-offs that could cause the financial markets to spiral out of control.
They also suggested that stablecoins may need to be regulated as strictly as banks and money market funds to prevent pressure in the stablecoin market from spreading to broader financial markets and the treasury market.
Regarding the role of stablecoins in tokenized transactions, the advisory group believes that 'Central Bank Digital Currency (CBDC) may need to replace stablecoins in the future, becoming the mainstream form of digital currency.'
If the Federal Reserve (Fed) launches a CBDC, it may be managed by private banks; however, due to the Republican Party's strong opposition to CBDCs, the political prospects for the U.S. to launch a CBDC remain unclear in the short term.
The advisory group's report summary points out that asset tokenization is expected to bring new economic models to various physical asset markets, but if used in the short-term U.S. Treasury market, it may 'impact the banking system' as these tokenized assets could become potential competitors to bank deposits.
"Replacing stablecoins with 'Central Bank Digital Currency'? Shocking recommendations from the U.S. Treasury advisory group revealed!" This article was first published on (Blockchain Customer).