The US Treasury’s Borrowing Advisory Committee (TBAC) explored the impact of stablecoins on the demand for short term Treasuries. One topic was mentioned repeatedly – the potential for stablecoins to offer interest. The last iteration of the Senate’s stablecoin bill, the GENIUS Act, introduced a clause that banned the payment of stablecoin interest before receiving a positive vote by the Senate Banking Committee. The TBAC report used a figure from Standard Chartered research that estimates that stablecoins will grow to $2 trillion by 2028 assuming stablecoins don’t pay interest. As an aside, Citi also recently published forecasts. The mid April capitalization of stablecoins was $234 billion, which accounts for approximately $120 billion investment in short-dated Treasuries. Combining that with Standard Chartered’s figure, the report estimates that stablecoin investment in Treasuries will expand to $1 trillion by 2028. If stablecoins were to offer interest, the figure could be quite a bit higher, although no forecast was provided. That would account for a significant slice of the short term Treasury Bill market, which currently has a $6.4 trillion issuance. A key reason why most global stablecoin regulation has not supported the payment of interest is because there is a concern that bank deposits might shift to stablecoins, potentially affecting the economy with less credit available from banks, or credit might become more expensive. The TBAC report states that transactional demand deposits at banks that total $6.6 trillion are most “at risk” from stablecoins. Apart from delving into the potential for stablecoins to offer interest, two other issues were floated – the potential to allow stablecoin issuers access to the Federal Reserve and / or deposit insurance. This would help reduce the impact of de-peg events.