Stablecoins: Not My Kind of “Stable”

If you own Treasuries, TIPS, or a well-diversified bond portfolio, you already know what safety looks like: steady income, predictable maturity dates, and the full faith and credit of the U.S. government.

Stablecoins? They’re a different animal.

A stablecoin is a digital token pegged to the U.S. dollar and usually backed by assets like Treasury bills. It can be transferred instantly worldwide, which sounds great — until you remember there’s no FDIC insurance, no government guarantee, and no regulator standing behind it in a crisis. If the issuer gets into trouble, you’re just another unsecured creditor waiting in line.

Here’s the real kicker for investors:

Those Treasury bills or other safe assets backing the stablecoin generate interest — but the yield goes to the issuer, not to the holder.

In exchange, the holder gets a dollar-pegged token that depends entirely on the issuer’s operational competence and integrity.

Yes, stablecoins can make sense for crypto traders or businesses that need instant settlement. But for us individual investors — especially those already holding Treasuries or TIPS — the benefit is thin. We already have:

Direct ownership of the safest assets. No middleman, no counterparty risk.
Guaranteed payment at maturity. Whether we buy a 3-month bill or a 30-year TIPS, we know exactly what we’ll get back.
Yield in our own pocket. The interest belongs to us, not a coin issuer.

So if someone is tempted to move part of their bond portfolio into stablecoins because they sound “modern” or “efficient,” remember: they’d be giving up a government guarantee and a real yield for a digital promise and no interest.

When it comes to safety, I’ll take my boring ladder of Treasuries and TIPS over a shiny token any day.

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