A Bank of International Settlements study warns that a bank run on a major stablecoin issuer could cause "potential fire sales" in short-dated US Treasuries. Stablecoin issuers' pricing impact on the world's largest bond market is "already measurable" and growing... 🧵

The $268 billion stablecoin market is tiny compared to $29 trillion in outstanding US Treasuries, but researchers found asymmetric effects: outflows from stablecoins raise three-month Treasury yields "two to three times as much as inflows lower them."

Under normal conditions, stablecoins impact Treasury pricing by just 2-2.5 basis points (less than 0.03%). But researchers warn this could rise "non-linearly" - meaning parabolically - during a bank run scenario on giants like Tether or Circle.

The study's estimates are conservative because they're based on "orderly, linear data from stable market environments." During "severe stress" like a stablecoin collapse, "non-linear effects" could cascade into fire sales of three-month Treasuries

Donald Trump praised stablecoins on July 18, claiming they strengthen the US dollar's reserve currency status and improve national security. This BIS research suggests a major stablecoin collapse could destabilize the Treasury market that backs them ⤵️