Economist and veteran crypto skeptic Peter Schiff recently raised concerns about stablecoins, arguing that they could disrupt U.S. Treasury markets and broader financial stability.
Schiff challenged the common belief that stablecoins add liquidity to Treasury demand, instead asserting that these digital assets divert funds away from traditional money markets without creating new capital.
In a post on X, Schiff explained that when investors hold funds in stablecoins, the issuers typically invest in short-term Treasury bills. Unlike money market funds, which pass the Treasury yields directly to investors, stablecoin issuers keep the interest earnings themselves. Schiff warned this practice reduces the capital available for private lending and could push up long-term Treasury yields, indirectly increasing mortgage rates and borrowing costs.
He further noted that stablecoins exclusively fund short-duration Treasuries and cannot support long-term government bonds. This imbalance, according to Schiff, may shrink demand for long-term bonds, which are crucial for setting stable mortgage interest rates. The capital locked in stablecoins is effectively unavailable for private borrowers, potentially disrupting credit markets and restricting productive capital flow.
Schiff’s perspective counters the optimistic views of financial giants like BlackRock, which champions stablecoins as innovative tools enhancing market efficiency through their speed, transparency, and utility. Yet, Schiff fears the rapid growth of stablecoins could undermine financial market stability, especially as pro-crypto legislation such as the GENIUS Act advances.
As stablecoin adoption accelerates, regulators face the difficult task of integrating these fiat-pegged digital assets into the financial system. The debate continues over whether stablecoins represent a bridge to financial innovation or a growing systemic risk.
The discussion reflects wider uncertainty about stablecoins’ role in supporting U.S. Treasury demand versus fueling speculative activities, with Schiff emphasizing their limitations as drivers of economic stability.
Also, Peter Schiff has advised Ethereum holders to convert their Ether to Bitcoin, citing chart analysis and perceived structural weaknesses in Ethereum as reasons for his skepticism about its long-term viability, despite its recent price surge. This warning comes amidst an analyst’s opinion, shared by SharpLink Gaming, that Schiff’s timing is ill-considered.
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