Stablecoin issuers could be looking at lower income as the Federal Reserve (Fed) kicked off its first rate cut cycle since꧙ 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开奖号码历史查询:Fed itself expects cuts totaling 50 basis points by the end of this year, and another 100 basis🍒 points by the end of next year.

Why Would A Rate Cut Affect Stablecoins?

Stablecoins are cryptocurrencies whose value is pegged to another cryptocurrency. Some of the most popular stablecoins have their value 𓆉pegged to the U.S. dollar and keep a reserve 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开奖号码历史查询:Treasurys earning interest over the past few years as high interest rates drove up Treas💯ury yields.

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

Tether, the largest stablecoin b𒈔y market cap, alone holds $93.2 billion worth of U.S. debt, which accounted for much of that digital asset company's $5.2 billion of profits in the first half of 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开奖号码历史查询:riskier assets in an effort to earn a return on their reservജes.

"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.