Bessent Backs Potential Expansion of Fed's FIMA Repo Facility, With Implications for Crypto Risk Appetite

US Treasury Secretary Scott Bessent said it is "reasonable" for the Federal Reserve to consider expanding the capacity of the FIMA Repo Facility, describing it as an "important backstop" given current market conditions. The Foreign and International Monetary Authorities (FIMA) Repo Facility functions as an emergency dollar-liquidity channel for foreign central banks. It allows eligible institutions to temporarily exchange US Treasury holdings for dollars, currently capped at $60 billion per institution for up to seven days. The Fed launched the tool in March 2020 as global dollar funding markets seized up during the pandemic and made it permanent in 2021. The key policy objective is to reduce the risk that foreign official holders are forced to sell US Treasuries into the open market at distressed prices when they need dollars quickly. With foreign central bank deposits at the New York Fed near $3 trillion, the scale of potential stress is large. Bessent's case for a larger facility centers on market growth since 2020. As the Treasury market has expanded, the existing caps may no longer reflect the size of possible liquidity demands. If capacity is insufficient during a squeeze, a central bank may face a choice between taking less liquidity than needed through FIMA or selling Treasuries, a move that could lift yields and amplify instability. His remarks follow recent US-Japan action in FX markets aimed at stabilizing the yen after it fell to historic lows. The US reportedly conducted its first yen-buying operation since 2011, with purchases estimated at $5 billion to $10 billion. Japan is among the largest foreign holders of US Treasuries, and rapid dollar needs to support the yen could translate into Treasury sales if swap-style backstops are constrained. For crypto and broader risk assets, a larger FIMA facility would effectively strengthen global access to dollar liquidity. By reducing the likelihood of forced Treasury selling, it can help limit upward pressure on yields and support a more stable backdrop for risk-taking. The reverse is also true: if FIMA proves too small in a stress event, a Treasury selloff could tighten financial conditions quickly. Bitcoin has tended to be sensitive to abrupt liquidity withdrawals, including episodes tied to yen carry trade unwinds. No potential new cap has been disclosed. Market participants will watch any adjustment closely, as a meaningful increase would represent a notable expansion of the global dollar safety net.