The total valuation of stablecoins, these crypto-assets designed to maintain parity with fiat currencies, is expected to reach $4 trillion in 2025. This explosive growth, which already sees payment volumes via stablecoins exceed those of traditional players like Visa or Mastercard, introduces major systemic risks for global financial stability. In response, regulators, particularly in Europe with the MiCA regulation, are beginning to implement frameworks to contain these new vulnerabilities while exploring the potential of this technology for financial inclusion.
Born in 2014 with the creation of BitUSD, stablecoins have experienced rapid evolution, moving from an experimental niche to a central element of the crypto-asset ecosystem. Their history is marked by attempts to create a stable digital asset capable of serving as a bridge between traditional finance and the cryptocurrency world. This evolution has not been without turbulence, with several notable failures that have highlighted the challenges inherent in the design and management of these financial instruments. The analysis of banking history, particularly the "free banking" period in the United States, offers an instructive parallel on the risks of monetary fragmentation and banking panics when multiple forms of private money coexist without solid anchoring and adequate regulation [4].
Stablecoin Market Concentration Creates Systemic Dependence
The stablecoin market is marked by extreme concentration that constitutes a primary source of risk. Nearly 90% of global market capitalization is controlled by only two issuers, Tether (USDT) and Circle (USDC), both relying primarily on guarantees denominated in US dollars [1]. This centralization creates systemic dependence on a small number of actors and a single reference currency. A failure of one of these giants, or a crisis of confidence in their reserves, could trigger a shock wave throughout the entire crypto-asset ecosystem and spread to traditional financial markets. The contagion channels are multiple: a massive sale of reserve assets (Treasury bonds, commercial paper) by a troubled issuer could destabilize money markets. Moreover, direct and indirect financial links between stablecoin issuers, cryptocurrency exchange platforms, and investment funds create a complex network where the failure of one actor can quickly bring down others.
This concentration of market power has direct implications for the liquidity and stability of short-term funding markets. Stablecoin issuers have become major holders of US Treasury bonds, rivaling established institutional actors [1]. Massive investment flows toward stablecoins, or conversely, large-scale redemption demands, now have the capacity to influence short-term bond yields. This mechanism can interfere with the transmission of central banks' monetary policy, one of whose main levers is the control of short-term interest rates. Additionally, some stablecoin issuers generate additional revenue through securities lending operations (reverse repos), which can add tensions to repo market liquidity during periods of stress [1].
Issuer Reserves: A Gray Zone with High Liquidity Risks
The main risk associated with stablecoins lies in the nature and management of their reserves. Although stablecoins backed by fiat currencies are perceived as less volatile than other crypto-assets, they are not exempt from risks. Unlike the majority of bank deposits, stablecoins generally do not benefit from any insurance. The stability of their value depends entirely on the quality and liquidity of the reserve assets that guarantee them [1].
A variation in the value of these reserve assets can cause a deviation in the stablecoin's market value from its theoretical parity. Such an event can trigger a wave of redemptions by holders, a phenomenon similar to a bank run. If the issuer does not have sufficient liquidity to honor all demands, it may be forced to sell its assets urgently (fire sales), which could further depress the prices of these assets and exacerbate the liquidity crisis. The Bank for International Settlements (BIS) 2025 annual report emphasizes that stablecoins, in their current form, do not meet the fundamental criteria of uniqueness, elasticity, and integrity necessary to constitute a reliable basis for the monetary system [2]. History is rich with examples of private currencies that failed due to their inability to maintain confidence. Algorithmic stablecoins, which attempt to maintain their parity through automated market mechanisms rather than through direct reserves, have been particularly subject to spectacular collapses, such as that of TerraUSD in 2022, which erased tens of billions of dollars in value in a few days. This textbook case demonstrated the inherent fragility of a system not backed by real and liquid assets, and served as a catalyst for global regulatory awareness of the need for strict oversight of reserves.
The growing interconnection between stablecoin issuers and the traditional banking system adds another layer of vulnerability. Companies in the crypto ecosystem, including stablecoin issuers, hold significant bank deposits, sometimes required by regulation. These deposits can prove to be an unstable source of funding for banks. Sudden and massive withdrawals by issuers to meet their own liquidity needs could disrupt the availability of bank credit and create tensions on the balance sheets of the banks concerned [1].
MiCA Regulation in Europe: A First Structured Response to Risks
Faced with the rise of these risks, regulatory authorities have begun to act. The European Union has been pioneering with the adoption of the Markets in Crypto-Assets (MiCA) regulation, which came into force in December 2024 [3]. This regulatory framework is one of the first comprehensive attempts worldwide to regulate the entire crypto-asset sector, with specific and strict provisions for stablecoins, designated under the terms "asset-referenced tokens" (ARTs) and "e-money tokens" (EMTs).
MiCA imposes rigorous requirements on stablecoin issuers. They must obtain authorization as a credit institution or e-money institution, which subjects them to prudential supervision. The regulation also imposes strict rules concerning the composition and management of reserves. These must be completely segregated from the issuer's own assets and invested in liquid and low-risk assets. Capital requirements are also provided to absorb potential losses. Additionally, MiCA frames the rights of holders, guaranteeing them a right to redemption at nominal value at any time and without fees.
However, despite its pioneering nature, the MiCA framework presents challenges. Supervision of cross-border transactions remains a major complexity, creating opportunities for regulatory arbitrage. International cooperation is therefore essential to ensure effective and consistent application of rules globally and prevent risks from simply shifting to less regulated jurisdictions [1].
Beyond Risks: The Potential of Stablecoins for Financial Inclusion
Despite the significant risks they present, stablecoins and the underlying tokenization technology offer potential to improve financial inclusion, particularly in emerging economies. Their ability to facilitate fast, low-cost, and pseudonymous cross-border transactions makes them attractive for remittances from migrant workers and for international trade by small businesses [2].
In many developing countries, where access to traditional banking services is limited and expensive, stablecoins could offer an alternative for savings and payments. However, this potential is tempered by significant challenges. The use of stablecoins denominated in foreign currencies, such as the US dollar, can lead to "digital dollarization" that weakens national central banks' control over their monetary policy and can increase exchange rate volatility during crises [1].
The BIS explores an alternative vision where tokenization is integrated into the existing financial system, through the concept of a "unified ledger." This infrastructure would allow combining on the same platform tokenized versions of central bank money, commercial bank money, and other financial assets. Such an approach could exploit the advantages of tokenization in terms of efficiency and new functionalities, while maintaining the confidence and stability guaranteed by the two-tier monetary system, anchored by the central bank [2]. This path represents a potential solution to reconcile innovation and stability, channeling the potential of stablecoins within a robust and secure regulatory framework.
References
- [1] Roulet, C. (2026, 20 janvier). Stablecoins on the rise: A risk for financial stability?. OECD ECOSCOPE. https://oecdecoscope.blog/2026/01/20/stablecoins-on-the-rise-a-risk-for-financial-stability/
- [2] Bank for International Settlements. (2025, juin). Annual Economic Report 2025. https://www.bis.org/publ/arpdf/ar2025e.htm
- [3] European Securities and Markets Authority. (s.d.). Markets in Crypto-Assets Regulation (MiCA). https://www.esma.europa.eu/esmas-activities/digital-finance-and-innovation/markets-crypto-assets-regulation-mica
- [4] A16z Crypto. (2024, 14 novembre). A useful framework for understanding stablecoins: Banking history. https://a16zcrypto.com/posts/article/understanding-stablecoins-banking-history/
- Beyond their role as a bridge to traditional finance, stablecoins have become a cornerstone of the decentralized finance (DeFi) ecosystem. They fulfill several essential functions there. First, they serve as a unit of account and stable store of value, allowing users to protect themselves from the extreme volatility of other crypto-assets like Bitcoin or Ethereum. Second, they constitute the main type of collateral used in decentralized lending and borrowing protocols. Users can deposit their stablecoins to earn interest or use them as collateral to borrow other assets. Finally, they are the main exchange currency on decentralized exchange platforms (DEX), facilitating the vast majority of transactions.
- This deep integration into DeFi, however, creates additional contagion risks. A problem with a major stablecoin could not only trigger panic on centralized markets but also cause a cascade of liquidations on DeFi protocols. If the value of stablecoin collateral drops sharply, many lending positions could become under-collateralized, forcing their automatic liquidation and causing significant losses for lenders and borrowers. The complexity and interconnection of DeFi protocols make these liquidation cascades difficult to anticipate and contain.
- The environmental impact of crypto-assets is a subject of growing concern, primarily due to the energy consumption of consensus mechanisms like Proof-of-Work, used by Bitcoin. Stablecoins, as tokens, do not have their own consensus mechanism, but their environmental impact depends on the blockchain on which they are issued. The majority of stablecoins, including the largest ones like Tether (USDT) and USD Coin (USDC), are issued on multiple blockchains, including Ethereum, which recently transitioned to a Proof-of-Stake mechanism that is much less energy-intensive. However, a significant portion of their circulation remains on blockchains using Proof-of-Work. Regulatory and public pressure for more sustainable finance could push stablecoin issuers to favor the most energy-efficient blockchains in the future, but the question of energy consumption of the underlying infrastructure remains an important consideration.
- One of the most frequently advanced arguments in favor of stablecoins is their potential for financial inclusion in emerging countries. In countries like Argentina or Venezuela, facing chronic hyperinflation and strict capital controls, stablecoins pegged to the US dollar have become a popular alternative for preserving savings and conducting transactions. They allow citizens to bypass a failing local financial system and access a relatively stable store of value. Local platforms allow buying and selling stablecoins for local currency, creating a parallel financial system. For independent workers and businesses working with foreign clients, stablecoins offer a fast and low-cost way to receive international payments, avoiding the high fees and delays of traditional bank transfers. These concrete use cases demonstrate the potential of stablecoins to meet real needs where traditional finance is inaccessible or inefficient. Nevertheless, they also raise complex questions for local governments regarding monetary policy, capital controls, and anti-money laundering.
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