Central banks see risk of rapid redemptions and Treasury fire-sales, while industry leaders argue stablecoins remain safer than traditional banking.
Global financial authorities are increasingly alarmed that the rapid expansion of stablecoins could amplify market stress during periods of geopolitical or economic volatility. Recent warnings from central banks in Europe, Australia and Asia suggest that a sudden loss of confidence in leading dollar-backed tokens could spark a wave of redemptions, forcing issuers to liquidate U.S. Treasuries at scale. However, major crypto firms dispute the threat, arguing that fully backed digital dollars are more resilient than critics acknowledge.
Stablecoin Risks Rise With Global Market Volatility
As new U.S. trade barriers unsettle global bond markets, several central banks argue that tariff-driven shockwaves could expose hidden structural weaknesses in the fast-growing stablecoin sector. One official compared the risk to the 2008 money-market fund run, warning that a similar liquidity crunch could unfold at a far larger scale.
The Dutch central bank’s Olaf Sleijpen cautioned that if market turmoil pushes yields higher and compresses liquidity, “you could end up in a situation where the underlying assets need to be sold quickly.” That scenario could trigger a rapid liquidation of U.S. Treasuries, the primary reserve asset for most leading stablecoins.
A report from the Dutch National Bank described the sector as “on a rocket trajectory”, projecting it could reach $2 trillion within three years under the U.S. GENIUS Act. The report warned that this explosive growth, combined with the dominance of Tether and Circle, creates the risk of mass redemptions similar to the 2023 USDC depegging.
Global Agencies Warn of Systemic Consequences
The Bank for International Settlements and the Reserve Bank of Australia echoed these concerns. A June analysis by the BIS warned that “a loss of confidence in stablecoins could lead to large and sudden redemptions,” potentially disrupting the globe’s most important government bond market. The RBA added that the market’s 50% growth in just one year has accelerated the point at which stablecoins become systemically relevant.
Both institutions noted that during periods of global stress, dollar-linked tokens become more attractive and more fragile at the same time, amplifying pressure on issuers’ reserve assets.
Industry Pushback: “Full-Reserve Stablecoins Are Safer”
Some U.S. officials and crypto industry leaders say fears of contagion are overstated. Federal Reserve Governor Stephen Miran rejected claims of systemic danger, arguing that stablecoins have been “unfairly treated as a pariah” despite becoming a core component of modern payments.
Coinbase Chief Policy Officer Faryar Shirzad offered an even sharper rebuttal, saying that “full-reserve backing makes stablecoins safer than banking.” He emphasized that while banks rely on long-term, often risky loans, stablecoin issuers hold liquid short-term government securities.
The debate over stablecoin risk is intensifying as global markets confront rising geopolitical tensions and rapid technological change. While central banks warn of a potential Treasury-market shock, industry leaders insist that robust reserves and transparent structures make stablecoins a stabilizing force. As adoption accelerates toward the trillion-dollar mark, regulators face mounting pressure to determine whether stablecoins represent a new systemic threat—or the next evolution of digital finance.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.