The Quiet Revolution in U.S. Treasuries

Why crypto is now a force in U.S. Treasury market stability

Ric Edelman: It's Wednesday, November 1st. There's been a lot of conversation lately about US Treasuries. There's about $25 trillion of US Treasuries outstanding. The maturities range from one month to 30 years. When you buy a treasury, you pick the maturity date. And when your treasury matures, you get your money back. If you want to keep owning treasuries, you got to buy a new one at today's interest rates.

Who's buying treasuries? The US banks buy them; big US corporations, insurance companies, diamond funds, pension funds and wealthy investors who want some of their money in super safe accounts. Also, foreign investors buy US treasuries. When I say foreign investors, I don't just mean foreign banks and corporations and insurance companies, I also mean foreign governments. About $8 trillion of our treasuries are owned by overseas investors and governments.

And the buzz lately has been that China, historically one of the biggest buyers of US treasuries, has not been reinvesting their treasuries as they've been reaching maturity. China's holding of treasuries are now about $822 billion. That's China's lowest amount since 2009. Why isn't China buying as many treasuries as it used to? Well, analysts are saying that China is busy buying its own currency, which has been dropping against the dollar in order for China to boost its own economy. And with China not buying all the treasuries that it's been holding for the past ten years, that means there's a lot of treasuries available for others to buy. 

But there aren't all that many other buyers out there. They're already buying as many treasuries as they want. So how does our US Treasury Department persuade people to buy more treasuries in the first place? The treasuries that China used to be buying?

Well, the Treasury Department's got to increase the yield to make the treasuries more tempting. That's a big reason, Wall Street says, as to why interest rates keep going up, even though the Federal Reserve is trying to get interest rates back down.

So there's an interesting angle about all of this. Guess who's one of the biggest buyers of treasuries these days? Yeah. Japan is still the largest non-US holder of treasuries. They've got $1.1 trillion worth of them. Nobody owns more treasuries than Japan. But guess who owns more T-Bills than Mexico, Australia, Spain or UAE? Tether. Tether owns $73 billion of US Treasuries, making tether one of the world's largest buyers of US Treasury bills. What on earth is tether? Tether is a stablecoin called USDT. Another stablecoin called USDC, has $8 billion in treasuries. In other words, crypto is coming to the rescue for US Treasuries. They're among the largest buyers in the world.

So what's a stablecoin? It's a digital asset backed 100% by US Treasuries. When you buy a stablecoin, you send them your money. And for every dollar you send in, you get one stablecoin. $1 equals one stablecoin. That means your money is pretty much as safe as if you bought the Treasury directly, but you don't earn interest with most stablecoins, that's a big drawback. 

So why do so many people buy them? I mean, there's about $100 billion, all told, in dozens of stablecoins. Why? Think of stablecoins like the cash fund in your brokerage account. You open a brokerage account because you want to buy stocks. You send in your money, and while you're deciding what stocks you want to buy, your cash sits in that cash fund. It's not earning any interest. You move the money from that cash to pay for the stocks you eventually decide to buy later when you decide to sell a stock. The proceeds of the sale go back into that cash account sits there until you decide what stock you want to buy next.

It's the same with crypto. You open an account to buy, say, bitcoin or Ethereum or Solana or Polygon or Litecoin or whatever. And when you don't want to be in the market, you move your money to the stablecoin for safekeeping until you're ready to buy more digital assets. Those digital assets are volatile. Bitcoin is certainly volatile. But the stablecoins, they're not volatile. That's why they're called stablecoins. Their prices are designed to be stable. A steady $1 per coin just like your bank account is stable.

It's funny that so many people are so skeptical about crypto, when in fact, if you really understood crypto, you'd realize that it's not only got massive financial and economic and business benefits, it's actually coming to the rescue of our global financial system thanks to its innovative technological advances. 

It's time for you to take the time to really understand all this. And I'm not just the only one saying that. Researchers at the University of Cincinnati are now calling for measuring your knowledge in what they call crypto economics. They've created a ten-question quiz to see how well you know crypto. Which private key storage method is most vulnerable to a cyber-attack that will steal your money? Who confirms that a bitcoin transfer is valid? What is a seed phrase? These are just samples of the questions that the University of Cincinnati thinks people need to be able to answer.

Crypto is now being taught at the University of Cincinnati. It's time for you to understand it too. And I have your solution. Get your CBDA to become certified in blockchain and digital assets. It's an online self-study course that I created several years ago. It is the oldest and most popular crypto education program out there, and when you finish it, you take it at your own pace online as you wish. When you're done, you obtain the CBDA designation, listed by FINRA as a professional designation.

By completing this course, you'll develop the knowledge you need not only about the technology. What is bitcoin? What is blockchain? How does it all work? But also about practice management? What's the investment thesis? What are the investment opportunities? How do you construct a portfolio? What are the compliance, tax, legal implications of crypto? Learn more about the CBDA designation.

I really encourage you to check this out. Join the thousands of financial advisors who have obtained their designation, so that you can demonstrate to your client that you're staying cutting edge on the latest information about the newest asset class. And by the way, you'll get up to 18 credits. At the same time, we now also offer a separate track for investors, consumers and students, and a new ex-US track for financial professionals working outside the United States. There are also separate tracks for back office financial executives and crypto professionals. Check it all out at DACFP.com.

The Hamas war against Israel is not an abstract headline. It's about real people fighting for their lives and Israel's very existence. It's not just about Israelis. This is a deeply personal fight for Americans, too. One such story comes from JB, a financial advisor with Edelman Financial who has disrupted his own life to make a difference in Israel's fight for survival. In a special episode of my podcast on Monday, November 6th. I'll be sharing JB's story, a moving testament to courage and commitment. Join me in support for JB and our support for Israel. 

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