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Treasury cash discussion highlights indirect link to Bitcoin’s market signal

The Sept. 22 debate at a New York Fed conference focused on whether excess Treasury cash should be lent into the overnight repo market, with no program, amount, or timetable announced.

Reported · Written up by our desk · Market Structure

Treasury officials and market participants discussed at a New York Fed conference on Sept. 22 whether the government should lend excess cash into the overnight repo market, which finances Treasury trades. The discussion covered a potential effect on bank reserves, but Treasury did not announce any repo-lending program, amount, or timetable, according to CryptoSlate.

While the topic was framed as cash management, the potential benefit for Bitcoin would be indirect, the outlet noted. CryptoSlate said several private-sector panelists welcomed the idea, and the Treasury Borrowing Advisory Committee had considered it in May and urged further study.

The proposed mechanism in the committee’s modeling involved Treasury General Account, or TGA, cash leaving the Fed and moving into overnight repo lending. That would be accompanied by an increase in bank reserves, with Treasury earning a repo rate while the Fed would pay interest on the additional reserves, making the net economic outcome depend on the spread between those rates, after costs.

CryptoSlate also pointed to Treasury’s August cash plan, which assumed a $950 billion TGA balance at the end of September and projected it could reach about $1.05 trillion, plus or minus $50 billion, in late October. The May committee analysis cautioned that with ample reserves, investing excess cash might produce only 0 to 2 basis points of economic return for the government on a consolidated basis, and recommended more design work given operational challenges.

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