Welcome to USD1treasuries.com

What are Treasuries and why they matter

U.S. Treasuries are marketable debt issued by the U.S. Department of the Treasury. The main types are Treasury bills (short term, one year or less), Treasury notes (two to ten years), Treasury bonds (twenty to thirty years), Treasury Inflation-Protected Securities or TIPS (whose principal adjusts with inflation), and floating rate notes or FRNs (with interest that resets based on a reference rate). All are backed by the full faith and credit of the United States government and can be bought at auction or traded in the secondary market.^[1] In practice, most reserve portfolios that support USD1 stablecoins concentrate on the very short end of the curve, especially Treasury bills, because they combine high credit quality, deep liquidity, and minimal interest rate exposure.^[2]

Why Treasuries are a natural reserve asset. Short‑maturity Treasuries have three properties reserve managers prize:

• Credit quality (the perceived ability and willingness of the U.S. government to pay).^[1]
• Liquidity (the ease of converting to cash at or near fair value), supported by a large, active secondary market with substantial daily trading volumes tracked by industry data.^[5]
• Predictable settlement (standard market conventions and robust infrastructure), including delivery‑versus‑payment on the Federal Reserve’s securities platform.^[3][4]

These features make Treasuries a leading component of “cash‑like” portfolios across finance, from corporate treasurers to money market funds. Reserve portfolios for USD1 stablecoins draw on the same toolkit for the same reasons.

How USD1 stablecoins typically use Treasuries

What “reserves” mean. A reserve is the pool of assets an issuer holds so that a token can be redeemed one for one in U.S. dollars on demand. In a conservative setup, reserves consist of U.S. dollar cash in bank accounts and short‑dated, high‑quality instruments such as Treasury bills and overnight repurchase agreements secured by Treasuries. Policy reports describe this model as the core of “payment stablecoins.”^[6]

Portfolio mix. While exact allocations vary among issuers and over time, public analyses by global bodies and central banks consistently note that reserves of leading dollar‑pegged stablecoins are heavily concentrated in Treasury bills and Treasury‑backed repos, with a smaller share in cash deposits.^[8][14][15] Short maturities reduce interest rate risk and make it easier to generate cash for redemptions without large price swings.

Income and economics. When a reserve portfolio holds Treasury bills or participates in repos, it earns interest. Most issuers use this interest to fund operations, compliance, and risk management rather than paying interest to token holders. That means the end user’s economic proposition is stability and convertibility, not yield. Public commentary and research regularly examine how changes in Federal Reserve policy rates affect this interest income stream.^[11][21]

Transparency expectations. Independent of jurisdiction, responsible reserve management for USD1 stablecoins generally includes frequent disclosures detailing asset types, maturities, and counterparties, often accompanied by attestations by third‑party firms. International standard setters emphasize stabilization mechanisms, governance, and risk controls rather than endorsing any single asset mix.^[7][8]

Liquidity, settlement, and getting to cash fast

From Treasury to cash at the bank. When redemptions rise, reserve managers need to turn securities into dollars quickly. Secondary‑market trades of Treasury securities typically settle on “T+1” (one business day after trade date), and same‑day settlement is possible under market convention.^[3] Transfers of the securities themselves occur on the Federal Reserve’s Fedwire Securities Service, which is a real‑time, delivery‑versus‑payment platform that settles in central bank money and provides finality once processed.^[2][4] Funds can move over Fedwire Funds Service, a real‑time gross settlement system for U.S. dollars, so that dollars become available to pay redeemers once securities are sold and cash is received.^[2]

Why maturity matters. A Treasury bill maturing in a few days converts to cash automatically at par at maturity, while a longer‑dated note depends on secondary‑market liquidity for quick sale at current prices. That is why issuers that focus on payment use cases for USD1 stablecoins tend to hold very short maturities as a first line of liquidity.

Market depth and turnover. The U.S. Treasury market is among the deepest in the world. Industry research tracks issuance, outstanding amounts, and average daily trading volumes for bills, notes, and bonds, highlighting the depth that underpins liquidity in normal conditions.^[5][9] Liquidity can still vary, and market structure reforms such as expanded central clearing are underway to strengthen resiliency.^[12]

Repos and money market funds

What a “repo” is. A repurchase agreement or “repo” is a short‑term, collateralized transaction: one party sells a security and agrees to buy it back later at a set price. In effect, the cash provider is extending a collateralized loan, and the security serves as collateral. In overnight repos the buyback is the next business day; in term repos it can extend further.^[3][16] In the tri‑party repo market, a clearing bank helps allocate and safeguard collateral between the cash investor and the dealer counterparty.^[9][16]

Why repos matter to reserves. For a reserve manager, repos secured by Treasuries provide dollar liquidity with minimal credit risk to the collateral, while allowing the portfolio to remain largely Treasury‑backed. Tri‑party infrastructure has been strengthened since the global financial crisis to reduce reliance on intraday credit and improve settlement processes.^[11][16][20]

Money market funds (MMFs). Some issuers gain indirect exposure to Treasury bills by investing reserves in government MMFs that are constrained by rule 2a‑7 under the Investment Company Act. Recent reforms removed redemption “gates,” increased minimum liquidity, and introduced liquidity fee mechanisms intended to reduce run risk in stressed markets.^[10] While MMFs and issuers of USD1 stablecoins are distinct, both share a focus on high‑quality, short‑duration assets and daily liquidity, and both interact with the Federal Reserve’s overnight reverse repo facility (ON RRP) as a policy floor for short‑term rates.^[11][17]

ON RRP in one sentence. The ON RRP facility allows eligible counterparties (including many MMFs) to place cash overnight with the Federal Reserve against Treasury collateral at a rate set by policymakers, helping establish a floor under short‑term money market rates.^[11][17][18]

Key risks when reserves include Treasuries

Interest rate risk (duration risk). If the reserve holds notes or bonds and market yields rise, those securities fall in price. Short maturities minimize this, but if a large redemption wave forces asset sales in a volatile market, realized losses can occur. Concentrating on very short‑dated bills aims to reduce this sensitivity.

Liquidity risk. Even deep markets can exhibit pockets of illiquidity, wider bid‑ask spreads, or settlement frictions, especially during stress. Policymakers and market groups continue to implement reforms such as broader central clearing for U.S. Treasury cash and repo trades to strengthen market plumbing and reduce contagion risk.^[12]

Operational and settlement risk. Securities trades must settle correctly and on time. Although Treasury trades usually settle T+1 and can settle same day, back‑office errors, time‑zone differences, and high volumes can produce fails. Industry transitions to faster settlement for many asset classes and the robust delivery‑versus‑payment design of Fedwire Securities Service help mitigate, but do not eliminate, these risks.^[3][4][18]

Counterparty and custody risk. Repos introduce counterparty exposure to the dealer, mitigated by collateral haircuts and tri‑party controls. Custody arrangements for securities and cash must protect client assets and enable rapid mobilization in stress. Reforms to the tri‑party market since 2009 specifically targeted weaknesses observed during the crisis, such as reliance on intraday credit from clearing banks.^[16][20]

Policy and run dynamics. Research by global bodies has explored how large inflows and outflows from stablecoins might affect short‑term Treasury yields. Recent work suggests inflows into dollar‑pegged stablecoins can marginally lower three‑month bill yields, while outflows can raise them more than proportionately, underscoring why liquidity management and redemption processes matter.^[15][12]

Legal and regulatory risk. Reserve composition rules can change. In the United States, recent official communications note new statutory requirements specific to stablecoins, including constraints on allowable reserve assets and maximum maturity for Treasuries counted as reserves.^[13] Internationally, recommendations emphasize governance, risk management, and the effectiveness of the stabilization mechanism, not just asset lists.^[7][8]

Policy and regulation snapshot

United States. The President’s Working Group on Financial Markets described the prudential risks of payment stablecoins and the importance of an effective, enforceable framework, including requirements on reserve assets, redemption rights, and risk management.^[6] More recently, official U.S. communications reference newly enacted stablecoin legislation setting out reserve composition requirements, including that Treasuries used as reserves must have a remaining maturity no longer than about three months, with flexibility to use cash, qualified deposits, and Treasury‑backed repos or government money market funds.^[13]

Global standard setters. The Financial Stability Board’s final 2023 recommendations for global stablecoin arrangements stress the need for robust stabilization mechanisms, clear governance, and comprehensive risk management. The recommendations also underscore expectations for redemption at par in a timely manner and for reserve assets to be of high quality and liquidity, subject to appropriate oversight.^[7] Publications by the Bank for International Settlements analyze market developments and policy approaches, highlighting links between stablecoins and traditional money markets and the potential for spillovers.^[8][15]

Market structure changes that matter for reserves. The U.S. Securities and Exchange Commission has adopted rules that will require central clearing of a broader set of U.S. Treasury cash and repo transactions, with compliance dates running through 2025 and 2026. For reserve managers, expanded central clearing can influence settlement workflows, margin, and intraday liquidity planning.^[12]

How to read a reserve report (and what to ask for)

1) Asset types and maturities. Look for a breakdown by cash, Treasury bills, Treasury‑backed repos, and other instruments. A maturity ladder (showing how much matures in the next week, month, and quarter) helps you gauge how quickly reserves can turn into cash at par.

2) Settlement channels. Clear statements about the use of the Fedwire Securities Service for Treasury transfers and Fedwire Funds for cash wiring can indicate robust operational design. Delivery‑versus‑payment and real‑time settlement are important safeguards for moving large amounts under stress.^[2][4]

3) Repo counterparties and haircuts. In repos, who are the dealers, what haircuts (extra collateral) are used, and is the repo tri‑party or bilateral? Tri‑party arrangements reduce some operational burdens by delegating collateral allocation and safekeeping to a clearing bank, though they still require careful oversight.^[9][16]

4) Use of government money market funds. If reserves include MMFs, is the fund type “government” or “treasury” and therefore limited to cash, Treasuries, and agency securities? Recent SEC rule changes affect liquidity buffers and fees under stress; disclosures should reflect these details.^[10]

5) Redemption mechanics and timing. How are redemption requests queued, what are cut‑off times, which banking rails are used, and how are exceptional volumes handled? If settlement relies on selling Treasuries, can trades settle same day when needed, or are they standardized to T+1?^[3]

6) Attestations and audits. Independent attestations of reserve balances and composition provide an external check. While an attestation is not the same as a full audit, it can still improve transparency when performed under recognized standards. Policy reports emphasize the importance of robust governance and transparency throughout the stablecoin arrangement.^[7][8]

Stress scenarios and practical implications

Scenario A: Busy, but orderly, redemptions. Suppose a temporary wave of end‑of‑month corporate withdrawals. A reserve manager can meet cash needs by allowing near‑maturity bills to roll off at par, selling a slice of slightly longer bills for same‑day or next‑day settlement, and running overnight repos to bridge settlements. With ample Treasury market liquidity, price impact is limited, and dollars wire out over Fedwire Funds to the redeemer’s bank.^[3][2]

Scenario B: Market stress. Liquidity thins and bid‑ask spreads widen. The reserve manager prioritizes cash on hand, near‑maturity bills, and tri‑party repos with conservative haircuts to raise funds. The ability to tap government MMFs for same‑day liquidity may help, subject to fund cut‑offs and the fund’s own flows. Central clearing timelines and collateral management rules influence execution choices. Robust back‑office capacity and clear communication with redemption clients become critical.^[10][12][16]

Scenario C: Sudden policy changes. New rules adjust the allowable composition of reserves or maximum maturity for Treasury holdings that count toward reserves. Portfolio managers shorten maturities and increase cash buffers while still maintaining convertibility. Research suggests that very large, synchronized outflows from stablecoins could exert upward pressure on front‑end yields, which feeds back into pricing and execution decisions.^[13][15]

What this means for end users of USD1 stablecoins. You are not buying a bond fund; you are using a token designed for dollar stability and ready convertibility. Interest from Treasuries typically accrues to the issuer to support operations. Your core questions are about redemption rights, speed, fees, and transparency—plus whether the reserve construction is conservative enough to weather the conditions you care about.

Global usage, time zones, and cross-border nuances

Time zones and settlement windows. If you operate outside U.S. hours, your redemption timing may straddle market cut‑offs. A sale of Treasuries late in the New York day may deliver cash the next business morning. Tri‑party repo, ON RRP interactions by MMFs, and bank wire cut‑offs all influence when dollars arrive.^[11][3]

Cross‑border conversions. If you will ultimately convert dollars into another currency, remember that foreign exchange settlement cycles, local banking holidays, and the recent industry transition to accelerated securities settlement can complicate timing. Industry playbooks and official notices prepared for T+1 emphasize the need for earlier affirmations and careful coordination across time zones.^[18]

Market structure evolution. The United States is moving toward broader central clearing of Treasury cash and repo markets, which can reshape settlement workflows for everyone, including reserve managers for USD1 stablecoins. Keep an eye on compliance dates and operational readiness across your banking partners and custodians.^[12]

Frequently asked questions

Are USD1 stablecoins “backed by Treasuries” the same as owning Treasuries? No. If you hold USD1 stablecoins, you typically do not receive coupon payments or price exposure. You hold a claim against the issuer for one U.S. dollar per token under the issuer’s terms. The issuer owns the reserve assets and bears the portfolio risk and income.

Why not hold only cash? Cash in insured bank accounts has limits and may earn less interest than short‑dated Treasuries. Holding only cash can also concentrate exposure to specific banks. A mix of cash, Treasury bills, and Treasury‑backed repos can diversify liquidity sources while maintaining a conservative risk profile.

Could Treasuries “run out” in a redemption wave? The U.S. Treasury market is very large, with significant average daily trading volumes. However, in system‑wide stress, liquidity can still become more expensive and slower. That is why reserve policies focus on very short maturities and multiple liquidity channels.^[5][12]

Do policy changes affect reserves? Yes. Frameworks that set requirements for reserve composition, maturity, custody, and disclosures can change over time. In the United States, official materials in 2025 describe a statutory framework that restricts what qualifies as eligible reserves and caps the maximum maturity of Treasuries that count, encouraging an emphasis on bills and short‑dated holdings.^[13]

Do stablecoins affect Treasury markets? Emerging research suggests flows into and out of dollar‑pegged stablecoins can move short‑term Treasury yields by small amounts, especially at the very front end. That is one reason supervisors and market participants pay attention to the intersection of stablecoins and money markets.^[15][14]

Glossary (plain English)

USD1 stablecoins — Any digital tokens that are designed to be stably redeemable 1 : 1 for U.S. dollars; used here only as a generic, descriptive term.

U.S. Treasuries — Marketable debt issued by the U.S. government: Treasury bills, notes, bonds, TIPS, and FRNs.^[1]

Treasury bill (T‑bill) — A short‑term U.S. Treasury security that matures in one year or less and is typically sold at a discount to par.^[1]

Repo (repurchase agreement) — A short‑term, collateralized transaction in which one party sells a security and agrees to repurchase it later at a set price; effectively a secured loan.^[3][16]

Tri‑party repo — A repo in which a clearing bank acts as agent to allocate and safeguard collateral between cash investors and dealers.^[9][16]

ON RRP — The Federal Reserve’s Overnight Reverse Repurchase Agreement facility, a policy tool that sets a floor under short‑term rates by offering an overnight investment option to eligible counterparties against Treasury collateral.^[11][18]

DVP (delivery‑versus‑payment) — Settlement mechanism where the transfer of securities occurs if and only if the corresponding cash payment occurs, reducing principal risk.^[4]

Fedwire Securities Service — The Federal Reserve’s real‑time securities platform for issuance, transfer, and settlement of U.S. government and some agency securities.^[4]

Fedwire Funds Service — The Federal Reserve’s real‑time gross settlement system for large‑value U.S. dollar wire transfers.^[2]

Money market fund (MMF) — A mutual fund that invests in short‑term, high‑quality instruments to offer stability and daily liquidity; “government” MMFs focus on cash and government securities and are governed by rule 2a‑7.^[10]

WAM/WAL — Weighted average maturity and weighted average life, measures used to describe how quickly cash flows return in a portfolio (lower values imply shorter interest rate exposure).

Sources

1. U.S. Department of the Treasury, “About Treasury Marketable Securities.” https://treasurydirect.gov/marketable-securities/.^[1]
2. U.S. Department of the Treasury, “Buying a Treasury Marketable Security.” https://treasurydirect.gov/marketable-securities/buying-a-marketable-security/.^[2]
3. Federal Reserve Financial Services, “Fedwire Securities Service Disclosure.” Statement that secondary‑market Treasury trades usually settle on T+1 and can settle on trade date. https://www.frbservices.org/financial-services/securities.^[3]
4. Board of Governors of the Federal Reserve System, “Assessment of the Compliance of the Fedwire Securities Service with the CPSIPS.” Describes delivery‑versus‑payment and real‑time settlement in central bank money. https://www.federalreserve.gov/paymentsystems/fedsecs_compliance.htm.^[4]
5. SIFMA Research, “U.S. Treasury Securities Statistics.” Market size and activity overview. https://www.sifma.org/resources/research/statistics/us-treasury-securities-statistics/.^[5]
6. President’s Working Group on Financial Markets, “Report on Stablecoins,” Nov 2021. https://home.treasury.gov/system/files/136/StableCoinReport_Nov1_508.pdf.^[6]
7. Financial Stability Board, “High‑level Recommendations for the Regulation, Supervision and Oversight of Global Stablecoin Arrangements,” July 2023. https://www.fsb.org/uploads/P170723-3.pdf.^[7]
8. Bank for International Settlements, “Stablecoin growth – policy challenges and approaches,” BIS Bulletin 2025. https://www.bis.org/publ/bisbull108.pdf.^[8]
9. Federal Reserve Bank of New York, “Tri‑Party/GCF Repo” overview. https://www.newyorkfed.org/data-and-statistics/data-visualization/tri-party-repo.^[9]
10. U.S. Securities and Exchange Commission, “Money Market Fund Reforms; Form PF; Fact Sheet,” July 2023. https://www.sec.gov/files/33-11211-fact-sheet.pdf.^[10]
11. Board of Governors of the Federal Reserve System, “Overnight Reverse Repurchase Agreement Facility.” https://www.federalreserve.gov/monetarypolicy/overnight-reverse-repurchase-agreements.htm.^[11]
12. SIFMA, “Treasury Market Structure” (central clearing timelines). https://www.sifma.org/explore-issues/treasury-market-structure/.^[12]
13. U.S. Department of the Treasury, “Report to the Secretary of the Treasury from the Treasury Borrowing Advisory Committee,” July 30, 2025, noting statutory stablecoin reserve requirements and maximum Treasury maturity that qualifies as reserves. https://home.treasury.gov/news/press-releases/sb0213.^[13]
14. Federal Reserve Bank of Kansas City, “Stablecoins Could Increase Treasury Demand, but Only by Reducing Demand for Other Assets,” Aug 8, 2025. https://www.kansascityfed.org/documents/11132/EconomicBulletin25Jacewitz0808.pdf.^[14]
15. Bank for International Settlements, “Stablecoins and safe asset prices,” BIS Working Paper 1270, 2025. https://www.bis.org/publ/work1270.htm.^[15]
16. Federal Reserve Bank of New York, “Key Mechanics of the U.S. Tri‑Party Repo Market,” Economic Policy Review (2012) and related materials. https://www.newyorkfed.org/medialibrary/media/research/epr/2012/1210cope.pdf.^[16]
17. Board of Governors of the Federal Reserve System, “Money Market Fund Repo and the ON RRP Facility,” FEDS Notes, Dec 15, 2023. https://www.federalreserve.gov/econres/notes/feds-notes/money-market-fund-repo-and-the-on-rrp-facility-20231215.html.^[17]
18. SIFMA, “T+1 Settlement Cycle Booklet,” Apr 12, 2024. https://www.sifma.org/wp-content/uploads/2024/05/T1-Settlement-Cycle-Booklet-2024.pdf.^[18]