As world markets proceed to soak up the prospect of latest U.S. commerce limitations, central financial institution officers in Europe and Asia warn that the volatility they create within the bond markets may expose one other hidden danger.
Much like Lehman Brothers’ 2008 debacle, which triggered a $600 billion money-market fund run, pressured the sale of economic paper, and froze world credit score markets, some central financial institution officers consider 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 current occasions have proven a glimpse of what that may appear like.
For instance, Donald Trump’s tariff threats are usually not geared toward crypto; nevertheless, the shockwaves they trigger could also be inadvertently hitting the digital greenback economic system a lot more durable than anybody anticipated. The U.S. president’s Oct. 10 risk to hit China with recent 100% tariffs wiped almost $20 billion off the crypto market in beneath 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 most important fiat-backed stablecoins.
Treasury bond fireplace sale?
With most stablecoins being the newest sizzling development in crypto and most of the main ones pegged to the USD, some warn that the chance of one other world contagion is likely to be actual.
Dutch Nationwide Financial institution (DNB) Governor Olaf Sleijpen, one of many 26 European Central Financial institution’s decision-making members, informed the Monetary Occasions a run on dollar-pegged tokens may set off fire-sales of U.S. Treasury bonds and drive central banks to rethink their financial insurance policies totally.
If tariffs push yields larger and liquidity decrease, which is the traditional response to commerce shocks, Treasury payments turn into much less secure exactly when they’re wanted most. “If stablecoins are not that stable,” Sleijpen cautioned, “you could end up in a situation where the underlying assets need to be sold quickly.”
Stephen Miran, a U.S. Federal Reserve Governor, appeared to preemptively refute that assertion, saying, stablecoins are an “innovation [that] has been unfairly treated as a pariah by some, but stablecoins are now an established and fast-growing part of the financial landscape.”
A current DNB report highlights that whereas “the stablecoin market is on a rocket trajectory” that “could hit $2 trillion within three years under the U.S. GENIUS Act”, a “huge risk lurks beneath its shiny veneer” due to its “explosive growth and the concentration as Tether and Circle control 80%.”
“Fast enlargement comes with strings connected,” the report added, noting the “risk of mass redemptions, like after the Silicon Valley Bank collapse, which could trigger sell-offs of U.S. Treasuries, stress crypto exchanges, and ripple through European financial institutions.”
Miran rejected the notion, saying that, “because GENIUS Act payment stablecoins do not offer yield and are not backed by federal deposit insurance, I see little prospect of funds broadly fleeing the domestic banking system.”
Other financial institutions have raised similar concerns. The Bank for International Settlements (BIS) and the Reserve Bank of Australia (RBA) agreed that global economic stress increases stablecoin use abroad while eroding the value and liquidity of the assets backing them.
In a June 2025 report, the BIS said, “A loss of confidence in stablecoins could lead to large and sudden redemptions, potentially disrupting the world’s most important government bond market.”
Trump’s tariff threats raise that stress. In a globalized economy in which cross-border trade becomes more volatile is also one in which dollar-tethered tokens become more attractive, as well as more fragile, creating pressure that could push the $310 billion stablecoin sector into global systemic relevance faster than regulators are prepared for, the RBA and BIS coincided.
The RBA notes in an October report that the volume of stablecoins grew more than 50% in 12 months to June 2025 and warns of the risks this growth represents. It adds that “business projections of development vary from $500 billion by 2028 to $4 trillion by 2035”.
The BIS mentioned that a number of business forecasts put the market at $2 to $3 trillion by 2030, a scale at which “even a moderate redemption shock could rival the Treasury market stress episodes seen in March 2020.”
The Australian central financial institution agrees with Sleijpen, saying “A sudden decline in sentiment towards stablecoins could trigger asset fire-sales with the potential to spill over into repo and other core US funding markets.”
Safer than banking
If such a state of affairs 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}.
Nevertheless, in Coinbase Chief Coverage Officer Faryar Shirzad’s opinion, “full-reserve backing makes stablecoins safer than banking” and their “broader adoption actually reinforces stability.”
He further explained: “banks make long-term, often risky loans to private individuals and corporations, which exposes them to both credit and liquidity risks. In contrast, stablecoin issuers typically hold short-term government bonds, which are virtually risk-free and highly liquid.”
