As international markets proceed to soak up the prospect of latest U.S. commerce obstacles, central financial institution officers in Europe and Asia are warning that the volatility they create in bond markets may expose new hidden dangers.
Just like the 2008 Lehman Brothers debacle that triggered a $600 billion cash market fund run, compelled a sale of business paper, and froze international credit score markets, some central financial institution officers imagine a stablecoin run may set off a a lot bigger and instantaneous fireplace sale of U.S. Treasuries.
Solely time will inform whether or not such a large-scale epidemic will happen once more, however some current occasions provide a glimpse of what it could possibly be.
For instance, Donald Trump’s tariff threats are usually not directed at cryptocurrencies. However the shockwaves they trigger could also be unintentionally hitting the digital greenback economic system a lot more durable than anybody anticipated. The US President’s risk to impose new 100% tariffs on China on October 10 wiped practically $20 billion from the cryptocurrency market in lower than a day.
One other associated stress occasion was the depegging of USDC in March 2023 following the Silicon Valley Financial institution failure, when uncertainty round reserve entry brought on the token to drop to $0.88. This incident stays an instance of how real-world monetary shocks could cause sudden redemptions in even the most important fiat-backed stablecoins.
A fireplace sale of presidency bonds?
Since most stablecoins are the newest sizzling development in cryptocurrencies, and lots of the main ones are pegged to the US greenback, some have warned that the chance of a brand new international outbreak may turn into actual.
Dutch Nationwide Financial institution (DNB) Governor Olaf Slijpen, one of many European Central Financial institution’s 26 decision-making members, advised the Monetary Occasions that the hoarding of dollar-linked tokens may set off a fireplace sale of U.S. Treasuries, forcing the central financial institution to fully rethink its financial coverage.
When tariffs increase yields and cut back liquidity—a typical response to commerce shocks—Treasury payments turn into much less steady exactly when they’re wanted most. “If a stablecoin isn’t very steady, you possibly can end up in a state of affairs the place it is advisable promote the underlying asset rapidly,” Slypen warned.
Federal Reserve Chairman Stephen Millan appeared to preemptively dispute this assertion, saying that stablecoins are “an innovation that has been unfairly marginalized by some, however they’re now a longtime and quickly rising a part of the monetary world.”
A current DNB report highlighted that “the stablecoin market is on a rocket trajectory” and will “attain $2 trillion inside three years beneath the US GENIUS Act”, however that “big dangers lurk beneath its shiny floor” because of its “explosive development and focus, with Tether and Circle controlling 80%.”
“Fast growth comes with constraints,” the report stated, including, “There’s a danger of mass redemptions just like the one which adopted the failure of Silicon Valley Banks, which may set off a sell-off in U.S. Treasuries, put stress on crypto exchanges, and spill over to European monetary establishments.”
Milan rejected this concept, saying, “GENIUS Act funds stablecoins haven’t any yield and are usually not backed by federal deposit insurance coverage, so there may be little likelihood of capital leaving the home banking system broadly.”
Different monetary establishments have expressed related considerations. The Financial institution for Worldwide Settlements (BIS) and the Reserve Financial institution of Australia (RBA) have agreed that international financial stress will enhance the usage of stablecoins abroad, whereas eroding the worth and liquidity of the belongings backing them.
“A lack of confidence in stablecoins may result in massive and sudden redemptions, disrupting the world’s most essential authorities bond market,” BIS stated in a June 2025 report.
President Trump’s tariff threats add to that stress. The RBA and BIS agreed that in a globalized economic system the place cross-border commerce turns into extra unstable, dollar-linked tokens are each extra engaging and extra susceptible, creating pressures that might push the $310 billion stablecoin sector into international systemic relevance earlier than regulators are prepared.
In its October report, the RBA famous that stablecoin volumes had elevated by greater than 50% within the 12 months to June 2025, and warned of the dangers this development represented. It added: “Projected trade development ranges from $500 billion by 2028 to $4 trillion by 2035.”
The BIS stated some trade forecasts peg the market at $2 trillion to $3 trillion by 2030, a measurement that “even a average redemption shock may rival the U.S. Treasury market stress episode seen in March 2020.”
The Australian Central Financial institution echoed Slypen’s sentiments, saying: “A sudden decline in sentiment in direction of stablecoins may set off a fireplace sale of belongings, with spillovers into repo markets and different core US funding markets.”
Safer than banks
If such a situation have been to play out, triggering a fireplace sale, the GENIUS Act ensures that the U.S. authorities must bail out stablecoin issuers and their holders within the tons of of billions of {dollars}.
Nonetheless, within the opinion of Faryal Shirzad, chief coverage officer at Coinbase, “full reserve backing makes stablecoins safer than banks” and “broader adoption would truly strengthen stability.”
He additional defined, “Banks make long-term and infrequently dangerous loans to people and companies, exposing 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.”
