Fed’s Milan Warns Stablecoin Issuance Threatens Control
Fed Governor Stephen Milan publicly warned that surging stablecoin issuance by Tether is eroding the Fed’s monetary control. He noted that Tether holds $135 billion in US Treasuries—more than many developed nations—and has expanded its USDT supply to $174 billion by Q3 2025. Milan argued that this rapid stablecoin issuance is pushing down the global neutral interest rate, a key benchmark for policy decisions.
Tether has grown largely unregulated. While Facebook’s Libra was blocked in 2019, Tether’s USDT has quietly become a primary payment tool in emerging markets. USDT adoption in countries such as Bolivia, Argentina and Turkey has surged, driven by ease of access and protection against inflation. Tether also holds over $12 billion in gold and 90,000 BTC, giving it significant market influence.
Milan warned that Tether could one day re-anchor USDT to a basket of assets—Treasuries, gold and bitcoin—creating a “hard” digital dollar. This shift threatens to diminish the Fed’s ability to steer monetary policy and could prompt tighter regulation of stablecoins.
Bearish
The Fed’s warning signals increased regulatory scrutiny and potential controls on stablecoin issuance. Historical precedent—such as the Libra crackdown—shows regulators can swiftly impose constraints when private digital currencies threaten monetary policy. Traders may anticipate tighter rules for USDT and other stablecoins, leading to short-term volatility and reduced liquidity. In the long run, stablecoin providers might face stricter reserve audits and capital requirements, dampening issuance growth and market sentiment.