Stablecoin issuers could be looking at lower income as the Federal Rওeserve (Fed) kicked off its first rate cut𒊎 cycle since 2020.

Each 50 basis point cut by the Fed could lead to a $625 million drop in total annual interest income for stablecoin issuers, according to a new report from digital asset data provider CCData.

Those hits could quickly add up as the 澳洲幸运5官方开奖结果体彩网:Fed itself expects cuts totaling 50 basis points by the end of this year, and another 100 basis points by the ꦦend of next year.

Why Would A Rate Cut Affect Stablecoins?

Stablecoins are cryptocurrencies whose value is pegged to another cryptocurre✤ncy. Some of the most popular stablecoins have their value pegged to the U.S. dollar and keep a 𝔍reserve in cash or equivalent investments—often U.S. Treasurys—to maintain that peg.

Centralized stablecoin providers, such as Tether (USDTUSD) and Circle (USDCUSD), have relied heavily on their holdings of U.S. 澳洲幸运5官方开奖结果体彩网:Treasurys earning interest over the past few years as high interest rates drove up Treasu𝕴ry yields.

U.S. Treasurys make up the vast majority of reserves held by stablecoin issuers, at just over 80%. This amounts to holdingsღ of nearly $125 billion worth of Treasurys.

Tether, the largest stablecoin by market cap, alone holds $93.2 billion worth of U.S. debt, which accounted for much of that digital asset company's $5.2 billio💜n of profits in the first half oﷺf 2024, the CCData report said.

Bitcoin.com Director of Engineering Andrei Terentiev speculated on social media that lower interest rates could eventually push stablecoin providers and other financial institutions into 澳洲幸运5官方开奖结果体彩网:riskier assets🐽 in an effort to earn a return on their reserves.

"With lower yields on safer assets, institutions often shift their focus toward 'risk-on' assets," Terentiev posted on the platform X. "Think stocks, crypto, and other investments that offer higher potential returns but come with greater risk," he wrote.