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 useful enough to become permanent in 2021. When foreign central banks desperately need dollars and can’t get them through normal channels, FIMA prevents them from dumping Treasuries on the open market at fire-sale prices.

Bessent’s argument for upsizing is straightforward. The Treasury market has expanded significantly since 2020, meaning the facility’s current caps may no longer match the scale of potential stress.

Without adequate capacity, a foreign central bank in a dollar crunch faces an ugly choice: either accept insufficient liquidity through FIMA or sell Treasuries into the market. The second option sends bond yields higher and creates exactly the kind of cascading instability that central bankers lose sleep over.

The yen intervention backdrop

Bessent’s comments didn’t arrive in a vacuum. They came just days after a coordinated US-Japan intervention in the foreign exchange market to stabilize the yen, which had been sliding to historic lows. The US reportedly conducted its first yen-buying action since 2011, with the potential size of those purchases estimated between $5 billion and $10 billion.

Japan holds one of the largest stockpiles of US Treasuries among foreign nations. If the Bank of Japan needed to raise dollars quickly to defend the yen without FIMA as an option, it would likely sell those Treasuries. That selling pressure would push Treasury yields up, tighten financial conditions globally, and create a domino effect across asset classes.

What this means for crypto and risk assets

An expanded FIMA facility means more dollar liquidity available globally. When foreign central banks can access dollars without selling Treasuries, it removes a source of upward pressure on yields. Lower or more stable yields tend to create a more accommodative environment for risk assets.

The mechanism works in both directions. If FIMA capacity proves inadequate during a stress event, the resulting Treasury sell-off would tighten conditions rapidly. Bitcoin has historically shown vulnerability during periods of sudden global liquidity withdrawal, as seen during prior episodes of yen carry trade unwinding.

The $60 billion per-institution cap hasn’t been publicly discussed in terms of what the new number might be. But given that the Treasury market has grown substantially since 2020 and foreign central bank deposits at the New York Fed sit near $3 trillion, any meaningful increase could represent a significant expansion of the global dollar safety net.