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#FOMC #Stablecoin #Crypto

At the beginning of August, the Federal Reserve (Fed) released the minutes of its July FOMC meeting. This set of minutes was somewhat unusual: if in past years the content was mostly the old themes of inflation, employment, and interest rate balance, then this time, a brand-new “protagonist” kept showing up again and again — stablecoins.

According to the full text of the minutes, the term “stablecoin” appeared eight times, its level of attention even exceeding that of some traditional topics. For the Fed, this was not a casual mention, but rather a deliberately bolded signal. One must know, in the traditional central bank lexicon, any word that gets repeatedly mentioned is basically a variable that could potentially shake the financial system.

This is not a coincidence. With the passing of the GENIUS Act, stablecoins have already leapt from being a marginal “crypto niche tool” to becoming a variable that could affect monetary policy, the banking system, and even U.S. fiscal policy. This means the Fed is no longer only watching inflation and the yield curve, but has begun turning its gaze toward that crypto field they once glossed over. In other words, stablecoins have now officially entered the Fed’s strategic horizon.

So, what exactly did the Fed say? And what does this mean for banks, the crypto market, and ordinary investors? Let’s break it down step by step.

Key Highlights of the Minutes: Three Core Themes

This meeting’s minutes mainly revolved around three blocks:

1. Macroeconomy and Interest Rates

Most members believe that inflation risks still outweigh employment risks. The interest rate level may be approaching neutral, but it is still not safe enough to relax. The effects of tariffs may show up with a lag, and companies could pass the costs onto consumers. In other words, the Fed still worries that “inflation might reignite.”

2. Asset Valuation and Market Bubbles

The minutes mentioned “concerns about elevated asset valuations.” This line is quite telling. It reads like a reminder to the markets: don’t just stare at rate-cut expectations, the frenzied rise in asset prices is also entering the Fed’s “watch list.”

3. The Sudden Rise of Stablecoins

A considerable portion of the minutes discussed payment stablecoins. Committee members believe stablecoins could improve payment efficiency and increase demand for U.S. Treasuries, but at the same time might also impact the banking system and monetary policy. More critically, they clearly pointed out that the passing of the GENIUS Act means the legitimate scope of stablecoin use is expanding.

To sum it up in one sentence: the rate path remains cautious → concerns about asset bubbles are rising → stablecoins became the biggest “keyword” in crypto.

If we carefully examine the language of the minutes, we can see the Fed’s attitude toward stablecoins shifting from “peripheral observation” to “core agenda.”

Scenarios mentioned: payment systems, demand for supporting assets (U.S. Treasuries), financial stability, monetary policy implementation.
Tone shift: no longer just “risk reminders,” but now beginning to analyze their systemic impact on the macro and financial system.

This means stablecoins are no longer just a “toy of the crypto circle,” but have entered the central bank’s strategic vision. Fed Governor Waller, in his speech, even directly pointed out: AI + stablecoins = the future of payment innovation. He even used the phrase “technology-driven revolution.” In other words, in official language, stablecoins have upgraded from “potential threat” to “potential opportunity.”

The “Subtext” of the Minutes: Who Wins, Who Loses?

We can treat the Fed’s minutes like an “official dress rehearsal script.” What’s written isn’t just what the central bank plans to do, but also who might benefit and who might get hurt.

1. U.S. Treasuries: The Winners

The minutes explicitly stated that with the possible increase in payment stablecoin usage, this will “boost demand for U.S. Treasuries and other safe assets.”

Why is this key? Because stablecoins must have a “backing,” and that backing needs to be both safe and liquid. For global investors, assets that meet both conditions are few and far between, and U.S. Treasuries are almost the “only standard answer.”

This means the expansion of stablecoins will naturally drive demand for Treasuries. The subtext of the minutes is: “Treasury Department, you don’t need to worry too much about debt issuance being absorbed, because stablecoins will become new buyers.”

Against the backdrop of persistent fiscal deficits and huge debt levels, this is a signal not to be ignored. Stablecoins act like an “automatic augmenter,” quietly propping up U.S. debt.

From the crypto perspective, this means stablecoins are no longer just “settlement tools in the crypto circle,” but are now deeply binding with the U.S. Treasury market. In other words, behind one USDC lies not just one dollar, but also one dollar plus the credit of the U.S. Treasury.

2. Banks: The Anxious Ones

The minutes noted that stablecoins could impact banks and the broader financial system. On the surface this sounds bland, but it actually reveals the anxiety within the banking system. The traditional banking profit model relies on two core elements:

Deposit sources: people’s money in banks enables lending and investing.
Payment channels: banks act as the infrastructure for domestic and cross-border payments, earning fees and spreads.

But once stablecoins gain traction, what happens?

Consumers and businesses might no longer need bank transfers, instead settling directly with stablecoins.
Deposits could partly migrate into the stablecoin ecosystem.

A simple example: if a company’s supply chain partners all accept USDC settlements, then it doesn’t need to keep all its funds in bank accounts, and would instead choose to hold stablecoins. Over time, banks’ deposit pools get “hollowed out,” and payment revenues get “diverted.”

This explains why the minutes, though not bluntly critical, contained a hidden concern: stablecoins might cut into banks’ bread and butter.

So we see an interesting contrast:

The U.S. Treasury market is “smiling” because of stablecoins;
The banking system is “anxious” because of stablecoins;
The Fed itself is the “conflicted one.”

3. The Fed: The Conflicted Arbiter

Another concern embedded in the minutes is that stablecoins could have broader effects on monetary policy implementation.

Why? Because the Fed’s main tool for adjusting the economy is interest rate policy, which transmits to markets through the banking system. If more and more funds bypass banks and flow directly into the stablecoin system, the Fed’s tools become blunter.

Imagine this: the Fed raises rates, intending for higher bank loan rates to reduce corporate and consumer borrowing, cooling down the economy. But if companies’ funds are mostly circulating in the stablecoin system, the sensitivity to bank loans decreases, and the efficiency of rate policy transmission is reduced.

That’s the Fed’s dilemma: stablecoins can improve payment efficiency and bring financial innovation, but at the same time might weaken monetary policy effectiveness, making “hikes” and “cuts” less effective.

The emphasis in the minutes on “monitoring the assets backing stablecoins” is essentially the Fed leaving itself a back door. The meaning is: I don’t oppose you playing, but I must watch you closely to ensure the whole system remains within my control.

Stablecoins = A Double-Edged Sword

To summarize in one sentence: stablecoins are like a double-edged sword.

On one side, they cut open payment efficiency, bringing new financial imagination.
On the other, they cut into the nerves of banks and monetary policy, causing discomfort to vested interests.

For the crypto market, this double-edged sword effect means stablecoins won’t be allowed to “grow wild and free,” but will instead “grow with shackles.”

From an investment perspective, this isn’t a bad thing. Because as long as the Fed is willing to pull stablecoins into formal discussions, it means they can’t be easily “killed off.” The only question is, in what form will they continue to exist:

As Wall Street and the Treasury’s “new tool”?
Or as a “decentralized force” preserving the crypto spirit?

The answer may slowly emerge over the coming years.

Opportunities and Risks for the Crypto Market

For the crypto market, the biggest significance of these minutes is that stablecoins have officially been included in the Fed’s core discussion circle. This brings several implications:

1. Legitimacy Enhancement, Wider Applications

The passing of the GENIUS Act legitimizes stablecoins. In the future, compliant stablecoins may quickly penetrate U.S. payments and settlement. This is a major boon for projects like USDC.

2. Revaluation of the Assets Behind Stablecoins

If stablecoin reserves increasingly allocate to U.S. Treasuries, it means the crypto world and traditional finance will bind more tightly. In a sense, stablecoins could become the “hidden bid” for Treasuries.

3. DeFi and Traditional Finance Interfaces

The “monitoring” mentioned in the minutes is not only regulatory pressure, but also potential interface opportunities. If compliant stablecoins become mainstream, DeFi’s legitimacy will also be lifted, since the underlying assets it relies on are more transparent and safer.

4. Risk: Squeezed Space for Decentralized Stablecoins

Compared with centralized projects like USDC and USDT, decentralized stablecoins (such as DAI, FRAX) face bigger policy risks. Because clearly, the Fed prefers stablecoins it can control.

Conclusion

On the surface, the minutes were about discussions of rates and inflation, but the real “Easter egg” this time was undoubtedly stablecoins. Imagine: ten years ago, how could Fed minutes ever mention Bitcoin? Twenty years ago, who could have thought “virtual currencies” would become a central bank research topic? Yet today, stablecoins are already written into FOMC’s official documents.

This feels like a “historic freeze-frame”: the crypto world is no longer just a marginal player, but is gradually becoming part of the global financial system.

So if you are a participant in the crypto market, whether in Bitcoin, Ethereum, or DeFi protocols, remember this set of minutes. Because it is not an isolated document, but the prelude to the trajectory of the crypto market over the next several years.

FOMC Minutes Interpreted: Stablecoins Take Center Stage, the Tug-of-War Between the Financial System and the Crypto World Is Accelerating