US Treasury’s Bessent backs expanding Fed’s FIMA facility, and crypto markets should pay attention

Treasury Secretary Scott Bessent just gave a public thumbs-up to the Federal Reserve expanding one of its lesser-known but critically important plumbing tools: the FIMA Repo Facility. His take? It’s “reasonable” for the Fed to consider increasing the facility’s capacity, calling it “an important backstop” in the current environment. For anyone not fluent in central bank infrastructure, here’s the thing. This facility is the mechanism that keeps foreign central banks from panic-selling US Treasuries when they need dollars fast. And when you’re talking about nearly $3 trillion in foreign central bank deposits sitting at the New York Fed, the stakes of getting this wrong are enormous. What FIMA actually does and why it matters The FIMA Repo Facility, which stands for Foreign and International Monetary Authorities, works like a pawn shop for central banks. Foreign monetary authorities can temporarily swap their US Treasury holdings for dollars, currently capped at $60 billion per institution for up to seven days. Quick in, quick out. The Fed created it in March 2020 when the pandemic sent global dollar funding markets into a tailspin. It was originally meant to be temporary, but proved...