Key Insights:
US Treasury issued a statement in a US Fed conference advising against the usage of alternate cross-border settlement systems.
The statement is seen as a comment on crypto and BRICS currency.
Crypto is being intensively used by financial giants like JP Morgan and PayPal for cross-border settlements.
Historically, the US Treasury had been relatively neutral towards crypto as Tether is the third largest buyer of US Treasury Bonds.
The US Treasury has issued a warning that any cross-border settlement system that does not adhere to its "expectations" could threaten the world economy.
The statement was issued by Brent Neiman, Assistant Secretary for International Finance. Speaking at a Federal Reserve Bank of New York conference, the top official said that "The United States must lead when it comes to cross-border payments".
The statement is seen as connected to two incidents: the increased usage of blockchain-based money remittance systems like XRPL to settle cross-border payments and the rise of a BRICS currency that could delink major economies like China, India, and Russia from the US-controlled SWIFT system of settlement.
The BRICS recently expanded from a nearly defunct 5-member organization to a 9-member global financial alliance that seeks to reduce the US dollar's dominance in the financial trade.
Despite the warnings, major money remitters worldwide, such as JP Morgan and PayPal, continue to use crypto to improve their businesses and save costs.
PayPal had been using its stablecoin, PYUSD, while JP Morgan reportedly used XRPL to conduct cross-border settlements.
The US Treasury has tried to investigate crypto and crypto-related crimes in the past but has never taken such a stance.
The regulator has previously investigated crypto scams, money laundering, Russia-linked sanctioned agencies, and the infamous Silk Road.
The US Treasury also holds all the crypto seized from various sources and the crypto belonging to the US Government. At press time, the treasury is assumed to hold roughly 208k Bitcoins worth over $19.68 billion.
US Government Crypto Holdings as on Arkham Intelligence
This data clearly shows that most of the assets held, around 98%, are in Bitcoins, while the other 2% are in Ethereum.
The current policy of OFAC, a body under US Treasury that regulates foreign assets of US citizens, is that US entities (individual or company) holding foreign assets (including crypto) comply with the sanctions on its SDN list. This means that the people cannot send or receive any crypto from those on the list and neither can interact with banned entities like Tornado Cash and Silk Road.
From these we can conclude that the US Treasury has generally been neutral towards crypto except in the last statement where they expressed distrust over it.
The US Treasury's relatively neutral stance, despite other authorities like the SEC being highly critical of it, is because crypto companies are the third largest buyers of the US Treasury.
Tether, the largest stablecoin issuer, is the third largest buyer of 3-Year US Treasury bonds. USDT is largely backed by US Treasury bonds, which makes it the highest-quality asset to back stablecoins.
There have been rumors lately that the US Treasury could sanction Tether. However, this is not likely because US Treasury bonds will have to pay more interest after the sanctions mentioned above due to the supply-and-demand effect.
Both the current notice and the remote threat of a sanction would not matter much after Donald Trump assumes the presidency because of his pro-crypto stance.
Further, being a businessman, he would unlikely allow the US Treasury to sanction the third largest buyer of their bonds, which essentially keeps the US Dollar afloat.
The Biden Administration has been anti-crypto since its swearing in when the case against Ripple was filed. Over the years, the SEC, the organization leading the drive, had spent around $450 million in litigation.
The same issue was also one of the rallying points that Donald Trump re-iterated in most of his rallies. Trump's address at the 2024 Bitcoin Conference at Nashville clearly mentioned this ant-crypto "crusade" of Biden. Trump also promised to fire the current SEC chief, Gary Gensler, when he assumes the presidency. Otherwise, Gensler would have retired in April 2026.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information but will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.