Fitch Ratings: stablecoins increasingly relevant for short-term credit markets

Fitch Ratings published a stablecoin dashboard as these digital currencies become increasingly relevant constituencies in the short-term credit markets. The market capitalization of stablecoins has increased rapidly, and the security portfolios of stablecoins are typically invested in short-term securities such as commercial paper (CP).

Fitch’s dashboard presents information on the overall stablecoin market, and aggregates information on the security portfolios of the largest stablecoins. The 10 largest stablecoins had an aggregated market capitalization of $126 billion as of end-September 2021 and Fitch estimated a 9M21 (first nine months of 2021) growth rate of 420%. Tether is the stablecoin with the largest market capitalization, reaching $68.4 billion as of 30 September 2021, followed by USDCoin at $31.4 billion.

Stablecoin security portfolio allocations are developing rapidly. USDCoin held 10% CP and 15% in certificates of deposits (CDs) as of end-June 2021. However, USDCoin’s portfolio significantly de-risked between June and August 2021, with cash and cash equivalents approximately doubling to 92% of portfolio assets. In contrast, as of end-June 2021, Tether held 49% of its assets in CP and CDs. Stablecoins are typically backed by a variety of different assets, including money market instruments, corporate bonds, funds and, potentially, precious metals.

Stablecoins are primarily used, at present, for storing proceeds from cryptocurrency trades. The “use case” for stablecoins may expand over time, particularly as regulatory clarity emerges. Should stablecoins gain wider traction and their security portfolios continue to grow, they could become more material participants in sectors such as the CP market.

See the dashboard

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