Stablecoin issuers risk disrupting the short-term funding market after the Federal Reserve restricted access to it, JPMorgan has said.
Recall that the Fed excluded in April as counterparties to overnight reverse repurchase agreements (RRPs) funds created for the sole purpose of accessing the facility.
Subscribe to our Telegram channel to get weekly short digests about events that shape the crypto world
As a result of this decision, stablecoin issuers will now have to compete with the $5.64 trillion money market fund industry for assets such as Treasury bills.
According to the paper:
"While prohibiting access to non-standard money-market funds makes sense from a financial stability perspective, it risks potentially disrupting the already-soft floor for money market rates that the Fed’s ON RRP currently provides."
Bank analysts believe the mechanism provides a safe and attractive place for money market funds, banks and other counterparties to "hold the money" overnight.