US Treasury Signals $250 Billion Deregulation Could Boost Bitcoin Markets
US Treasury Secretary Scott Bessent announced that a revision of banks’ supplementary leverage ratio (SLR) is approaching, which could influence Bitcoin markets. He indicated that regulators are close to implementing changes that may reduce Treasury yields by several basis points.
Impact on Bitcoin Markets
The proposed adjustments aim to exempt US Treasuries from the SLR, allowing banks to increase their purchases of government debt. Key points include:
- The SLR requires banks to maintain capital against total assets, including Treasuries.
- The proposed change would alleviate this requirement for sovereign bonds, a request pushed by the industry since March 2021.
- Current leverage rules are viewed as outdated and counterproductive to financial stability.
Market analysis indicates that US banks hold approximately $5 trillion in Treasuries. Eliminating the capital requirement could free up around $250 billion in tier-one capital, significantly impacting liquidity without additional money printing.
Following Bessent’s comments, ten-year Treasury yields fell below 3.95%. Lower yields tend to shift investor focus towards riskier assets, including Bitcoin. Analysts suggest that the willingness to adjust bank-capital rules reflects policymakers' concerns over deficits and economic stability.
However, some analysts express skepticism about the effectiveness of these changes due to lingering caution among banks following recent failures. Critics argue that additional reforms may be necessary for lasting impact.
Bitcoin typically responds positively to shifts in dollar liquidity, as lower Treasury yields decrease the attractiveness of cash-equivalent investments. Current data shows declining inventories at OTC desks, suggesting increased demand for Bitcoin as these entities must source coins from public exchanges.
While the SLR adjustment does not resolve fiscal challenges, it reduces constraints on bank balance sheets, potentially increasing interest in Bitcoin.
At press time, BTC traded at $108,790.
