For the record, does anyone else find it deeply concerning that the very institutions Bitcoin was designed to challenge are not only endorsing it but actively adopting it? This raises serious questions about their motives. My intuition signals a major red flag—could this be part of a larger, orchestrated strategy? Perhaps even one of the most elaborate "rug-pulls" in history? If the goal is to destabilize the current system to usher in a new one, this could be a critical step in that transition. ~ Namasté 🙏The Dinarian

The Department of US Treasury, in its Fiscal Year 2024 Q4 report, has emphasized Bitcoin’s rapid growth discussing its use case, especially in DeFi. Remarkably, it also acknowledged Bitcoin as a digital gold. 

A Store Of Value In The World Of Defi

According to the US Department, the primary use case for BTC, which they also referred to as “digital gold,” seems to be a store of value in the DeFi world. It underscored that the speculative interest seems to have played a prominent role in the growth of digital tokens thus far. 

Recently, the Fed Chair Jerome Powell also likened Bitcoin to gold as he compared both assets. Jerome Powell said that BTC is a speculative asset that has a closer correlation to gold than the US dollar.

The report also noted Bitcoin’s market cap over the years. In 2015, the flagship crypto had a market cap of $6.4 million. In 2019, it grew to $194 billion. Currently, Bitcoin boasts a market cap of $2.3 trillion. The Bitcoin price is not showing signs of stopping anytime soon, as it recently crossed the $100,000 milestone. Analysts note that Bitcoin’s success is driving institutional FOMO as more companies are looking to embrace it as an asset on their balance sheet. 

Stablecoin Growth

The US Treasury report also highlighted stablecoins as another category of digital assets that have seen rapid growth. The report stated that stablecoin growth has resulted in a modest increase in demand for short-dated treasuries.

Fiat-backed stablecoins are said to have a significant portion of their collateral in the form of treasury bills and treasury-backed repo transactions. The US Treasury estimates that $120 billion in total stablecoin collateral is directly invested in Treasuries.

It also noted that Stablecoins play an integral role intermediating transactions in digital asset markets. Over 80% of all crypto transactions now use a stablecoin as one leg of the transaction. Over the near term, the US department expects continued growth in stablecoin markets along with the overall size of the digital asset market. 

“The High Beta Assets”

The report also mentioned that in recent years, institutional sponsorship of Bitcoin citing instances of BlackRock ETF and MicroStrategy, has been growing and crypto assets have behaved like “high beta” assets. Further, they also predict that the rapid growth of Bitcoin and other digital assets and massive volatility might lead to future hedging needs and fight-to-quality demand for Treasuries

Link

Dinarian Note: It appears Europe is not the only one going after Tether... 

The Financial Stability Oversight Council (FSOC) raised concerns that stablecoins pose a mounting risk to financial stability due to inadequate oversight and significant market concentration, according to its 2024 annual report.

The report called for urgent legislative action to create a comprehensive federal framework for stablecoin issuers to mitigate risks tied to their rapid growth and limited transparency.

It also called for stricter oversight of the wider crypto market amid growing integration with the traditional financial system and sustained institutional adoption.

Recommendations for stablecoins

The FSOC emphasized that stablecoins, often marketed as reliable digital alternatives to traditional currencies, are acutely vulnerable to runs without stringent risk management standards.

It also argued that the opacity surrounding issuers’ reserves and operational practices further undermines market discipline and increases the potential for fraud. The report noted that one issuer accounts for approximately 70% of the market, amplifying the risk of systemic disruptions should the entity fail. However, it did not explicitly name the entity.

The council urged Congress to establish a comprehensive federal prudential framework for stablecoin issuers. Recommended measures include requiring robust reserve management, setting minimum capital and liquidity standards, and implementing regular reporting obligations.

The report stressed that such a framework would address risks related to payment system disruptions and enhance investor and consumer protections. FSOC members also highlighted stablecoins’ growing integration with traditional financial systems as a key concern.

The report warned that without appropriate risk management standards, any instability in the stablecoin market could cascade into broader financial markets. In the absence of legislative action, the council advised federal agencies to explore alternative regulatory measures under existing authorities.

Integration with TradFi

The FSOC also detailed the expanding footprint of crypto-assets in traditional markets and warned that the sector’s rising integration with traditional finance also required increased oversight.

While the total global market value of crypto-assets remains modest compared to traditional financial markets at just under $2 trillion, recent regulatory approvals of spot exchange-traded products (ETPs) have heightened investor accessibility. The market value of spot crypto-asset ETPs surged to nearly $80 billion in 2024 following the SEC’s approval of several listings earlier this year.

Despite their growth, the FSOC emphasized that the crypto-asset ecosystem remains a high-risk sector. The report identified significant gaps in regulatory oversight of the crypto spot market, citing a lack of explicit federal rulemaking authority to address fraud, market manipulation, and other risks.

To counter these challenges, the FSOC recommended granting federal financial regulators explicit powers to oversee crypto markets that fall outside securities regulation.

While acknowledging the transformative potential of digital assets, the FSOC emphasized the need for a balanced regulatory approach that supports innovation while safeguarding financial markets.

Link