As world markets proceed to soak up the prospect of recent U.S. commerce boundaries, central financial institution officers in Europe and Asia warn that the volatility they create within the bond markets may expose one other hidden danger.
Just 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 may unleash a far bigger, instantaneous fireplace 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 that may seem like.
For instance, Donald Trump’s tariff threats will not be geared toward crypto; nevertheless, the shockwaves they trigger could also be inadvertently hitting the digital greenback economic system a lot tougher than anybody anticipated. The U.S. president’s Oct. 10 menace to hit China with recent 100% tariffs wiped practically $20 billion off the crypto market in below 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 fireplace sale?
With most stablecoins being the newest sizzling pattern in crypto and lots of the main ones pegged to the USD, some warn that the danger of one other world contagion may be actual.
Dutch Nationwide Financial institution (DNB) Governor Olaf Sleijpen, one of many 26 European Central Financial institution’s decision-making members, instructed the Monetary Occasions a run on dollar-pegged tokens may set off fire-sales of U.S. Treasury bonds and power central banks to rethink their financial insurance policies completely.
If tariffs push yields greater and liquidity decrease, which is the basic response to commerce shocks, Treasury payments turn into much less steady exactly when they’re wanted most. “If stablecoins will not be that steady,” Sleijpen cautioned, “you might find yourself in a state of affairs the place the underlying belongings have to be offered rapidly.”
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 are actually 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 “may hit $2 trillion inside three years below the U.S. GENIUS Act”, a “enormous danger lurks beneath its shiny veneer” due to its “explosive progress and the focus as Tether and Circle management 80%.”
“Speedy enlargement comes with strings hooked up,” the report added, noting the “danger of mass redemptions, like after the Silicon Valley Financial institution collapse, which may set off sell-offs of U.S. Treasuries, stress crypto exchanges, and ripple by way of European monetary establishments.”
Miran rejected the notion, saying that, “as a result of GENIUS Act cost stablecoins don’t provide yield and will not be backed by federal deposit insurance coverage, I see little prospect of funds broadly fleeing the home banking system.”
Different monetary establishments have raised comparable issues. 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 belongings backing them.
In a June 2025 report, the BIS stated, “A lack of confidence in stablecoins may result in massive and sudden redemptions, doubtlessly disrupting the world’s most necessary authorities bond market.”
Trump’s tariff threats increase that stress. In a globalized economic system through which cross-border commerce turns into extra risky can also be one through which dollar-tethered tokens turn into extra engaging, in addition to extra fragile, creating strain that might push the $310 billion stablecoin sector into world systemic relevance quicker than regulators are ready for, the RBA and BIS coincided.
The RBA notes in an October report that the amount of stablecoins grew greater than 50% in 12 months to June 2025 and warns of the dangers this progress represents. It provides that “business projections of progress 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 may 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 may 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 fireplace sale is triggered, the GENIUS Act ensures that the U.S. authorities must 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 really reinforces stability.”
He additional defined: “banks make long-term, typically dangerous loans to non-public people and companies, which exposes them to each credit score and liquidity dangers. In distinction, stablecoin issuers sometimes maintain short-term authorities bonds, that are nearly risk-free and extremely liquid.”
