As world markets proceed to soak up the prospect of latest U.S. commerce boundaries, central financial institution officers in Europe and Asia warn that the volatility they create within the bond markets might expose one other hidden danger.
Much like Lehman Brothers’ 2008 debacle, which triggered a $600 billion money-market fund run, compelled the sale of business paper, and froze world credit score markets, some central financial institution officers imagine a stablecoin run might unleash a far bigger, instantaneous hearth sale of U.S. Treasuries.
Whereas solely time will inform if such a large-scale contagion will occur once more, some latest occasions have proven a glimpse of what which may appear like.
For instance, Donald Trump’s tariff threats should not aimed toward crypto; nevertheless, the shockwaves they trigger could also be inadvertently hitting the digital greenback financial system a lot more durable than anybody anticipated. The U.S. president’s Oct. 10 menace to hit China with recent 100% tariffs wiped almost $20 billion off the crypto market in underneath a day.
One other related stress occasion was USDC’s depeg of March 2023 following the Silicon Valley Financial institution failure, when uncertainty over reserve entry drove the token as little as $0.88. That incident stays an instance of how real-world monetary shocks can set off sudden redemptions in even the biggest fiat-backed stablecoins.
Treasury bond hearth sale?
With most stablecoins being the most recent sizzling development in crypto and most of the main ones pegged to the USD, some warn that the danger of one other world contagion is perhaps actual.
Dutch Nationwide Financial institution (DNB) Governor Olaf Sleijpen, one of many 26 European Central Financial institution’s decision-making members, advised the Monetary Instances a run on dollar-pegged tokens might set off fire-sales of U.S. Treasury bonds and power central banks to rethink their financial insurance policies completely.
If tariffs push yields larger and liquidity decrease, which is the basic response to commerce shocks, Treasury payments grow to be much less steady exactly when they’re wanted most. “If stablecoins should not that steady,” Sleijpen cautioned, “you could possibly find yourself in a scenario the place the underlying property have to be bought shortly.”
Stephen Miran, a U.S. Federal Reserve Governor, appeared to preemptively refute that assertion, saying, stablecoins are an “innovation [that] has been unfairly handled as a pariah by some, however stablecoins at the moment are a longtime and fast-growing a part of the monetary panorama.”
A latest DNB report highlights that whereas “the stablecoin market is on a rocket trajectory” that “might hit $2 trillion inside three years underneath the U.S. GENIUS Act”, a “large danger lurks beneath its shiny veneer” due to its “explosive development and the focus as Tether and Circle management 80%.”
“Speedy growth comes with strings hooked up,” the report added, noting the “danger of mass redemptions, like after the Silicon Valley Financial institution collapse, which might set off sell-offs of U.S. Treasuries, stress crypto exchanges, and ripple via European monetary establishments.”
Miran rejected the notion, saying that, “as a result of GENIUS Act fee stablecoins don’t provide yield and should not backed by federal deposit insurance coverage, I see little prospect of funds broadly fleeing the home banking system.”
Different monetary establishments have raised comparable considerations. The Financial institution for Worldwide Settlements (BIS) and the Reserve Financial institution of Australia (RBA) agreed that world financial stress will increase stablecoin use overseas whereas eroding the worth and liquidity of the property backing them.
In a June 2025 report, the BIS stated, “A lack of confidence in stablecoins might result in massive and sudden redemptions, probably disrupting the world’s most vital authorities bond market.”
Trump’s tariff threats increase that stress. In a globalized financial system wherein cross-border commerce turns into extra unstable can also be one wherein dollar-tethered tokens grow to be extra enticing, in addition to extra fragile, creating strain that might push the $310 billion stablecoin sector into world systemic relevance sooner than regulators are ready for, the RBA and BIS coincided.
The RBA notes in an October report that the quantity of stablecoins grew greater than 50% in 12 months to June 2025 and warns of the dangers this development represents. It provides that “business projections of development vary from $500 billion by 2028 to $4 trillion by 2035”.
The BIS stated that a number of business forecasts put the market at $2 to $3 trillion by 2030, a scale at which “even a average redemption shock might rival the Treasury market stress episodes seen in March 2020.”
The Australian central financial institution agrees with Sleijpen, saying “A sudden decline in sentiment in direction of stablecoins might set off asset fire-sales with the potential to spill over into repo and different core US funding markets.”
Safer than banking
If such a situation performs out and a hearth sale is triggered, the GENIUS Act ensures that the U.S. authorities should bail out the stablecoin issuers and their holders on a scale of a whole lot of billions of {dollars}.
Nonetheless, in Coinbase Chief Coverage Officer Faryar Shirzad’s opinion, “full-reserve backing makes stablecoins safer than banking” and their “broader adoption truly reinforces stability.”
He additional defined: “banks make long-term, typically dangerous loans to non-public people and firms, which exposes them to each credit score and liquidity dangers. In distinction, stablecoin issuers usually maintain short-term authorities bonds, that are just about risk-free and extremely liquid.”