Economist and crypto skeptic Peter Schiff has voiced concerns regarding stablecoins, arguing that they might adversely affect Treasury markets and overall financial stability.
Peter Schiff's Views on Stablecoins
Schiff challenges the common belief that stablecoins add liquidity to Treasury demand, asserting these digital assets divert funds away from traditional money markets without creating new capital.
Impact of Stablecoins on Financial Markets
The economist emphasizes that when investors hold funds in stablecoins, issuers typically invest in short-term Treasury bills. Unlike money market funds, which pass Treasury yields directly to investors, stablecoin issuers retain interest earnings. This practice, according to Schiff, reduces capital available for private lending, potentially pushing up long-term Treasury yields and indirectly increasing mortgage rates.
Critique and Alternative Views
Schiff also notes stablecoins exclusively fund short-duration Treasuries and cannot support long-term government bonds. This imbalance may shrink demand for long-term bonds, crucial for setting stable mortgage interest rates. He warns that capital locked in stablecoins is effectively unavailable for private borrowers, potentially disrupting credit markets and restricting productive capital flow.
The ongoing debate over the role of stablecoins in the US financial system reflects broader uncertainties, especially regarding their potential risks and benefits.
