Why the SEC’s Innovation Exemption Delay Matters for Tokenized Securities

The gold price kept rising this week, breaking through the US$4,600 per ounce level. Silver was on the move as well, pushing past US$69 per ounce.

A slew of drivers for both precious metals emerged during the period, but what’s attracting the most attention is an announcement from the US Department of the Treasury.

The department, which is led by Secretary Scott Bessent, said on Wednesday (August 19) that it will “at least double” purchases of long-term government debt. The change will go into effect on September 9, and will remain until November 4 of this year.

The Treasury said the unexpected intervention is designed to “provide greater liquidity support” to long-dated US debt; however, market watchers are interpreting it as concern about long-term yields, which have largely been trending higher since last year.

The move did initially push bond yields down, while prices, which move inversely to yields, increased. But the impact didn’t last — by the next day, those changes had reversed, suggesting investors aren’t convinced that long-term borrowing costs can be tamped down.

Adding fuel to the fire is the news that US debt now stands at over US$40 trillion, double where it was when US President Donald Trump first took office in 2017. Interest payments on the debt are now reportedly on track to become the government’s biggest expense.

This week also brought increased tensions between the US and Iran, with Trump posting on Truth Social that America plans to launch the “most crushing economic operation ever taken against any country.” Few details have been shared at this point.

Taken together, these circumstances have boosted enthusiasm for safe havens like gold and silver and weighed on the broader stock market. They’ve also created questions about the US Federal Reserve’s path forward — experts have drawn parallels between the Treasury’s buyback plan and “Operation Twist,” a similar strategy that was employed by the Fed back in 2011.

The goal of Operation Twist was to reduce long-term interest rates while stabilizing short-term rates. Part of its appeal was that it wasn’t seen as inflationary. This time around it’s a different story, and there are concerns that the Treasury’s actions will boost inflation.

Chair Kevin Warsh has emphasized the Fed’s 2 percent inflation target since taking the helm earlier this year, and minutes from the central bank’s July meeting, released this week, show that many officials believe higher rates may be necessary in the future.

For now, CME Group’s (NASDAQ:CME) FedWatch tool shows rates are expected to stay steady when the Fed meets in September, but more clues are seen coming out of next week’s Jackson Hole event.