As global markets continue to absorb the prospect of new US trade barriers, central bank officials in Europe and Asia are warning that the volatility they create in bond markets could reveal another hidden risk.
Similar to Lehman Brothers’ 2008 debacle, which triggered a $600 billion money market fund meltdown, forced the sale of commercial paper and froze global credit markets, some central bank officials believe a stablecoin run could trigger a much larger, immediate fire sale of U.S. Treasuries.
While only time will tell if such a large contagion will happen again, some recent events have shown a glimpse of what it could look like.
For example, Donald Trump’s tariff threats are not aimed at crypto; however, the shockwaves they cause may inadvertently hit the digital dollar economy much harder than anyone expected. The US president’s threat on October 10 to hit China with fresh 100% tariffs wiped nearly $20 billion off the crypto market in less than a day.
Another relevant stress event was USDC’s March 2023 depeg following the Silicon Valley Bank failure, where uncertainty over reserve access drove the token as low as $0.88. That incident remains an example of how real-world financial shocks can trigger sudden redemptions in even the largest fiat-backed stablecoins.
Fire sale of government bonds?
Since most stablecoins are the latest hot trend in crypto, and many of the most important are pegged to the USD, some warn that the risk of another global contagion could be real.
Dutch National Bank (DNB) Governor Olaf Sleijpen, one of the 26 European central bank decision-making members, told the Financial Times that a run on dollar-pegged tokens could trigger a fire sale of US Treasuries and force central banks to rethink their monetary policy entirely.
If tariffs push interest rates higher and liquidity lower, which is the classic response to trade shocks, Treasuries become less stable just when they are most needed. “If stablecoins are not that stable,” Sleijpen warned, “you can end up in a situation where the underlying assets have to be sold quickly.”
Stephen Miran, a US central bank chief, appeared to preemptively refute that statement, saying that stablecoins are an “innovation [that] has been unfairly treated as a pariah by some, but stablecoins are now an established and rapidly growing part of the financial landscape.”
A recent DNB report highlights that while the “stablecoin market is on a rocket trajectory” that “could hit $2 trillion within three years under the US GENIUS Act,” a “tremendous risk lurks beneath its shiny veneer” due to its “explosive growth and concentration as Tether and Circle control 80%.”
“Rapid expansion comes with strings attached,” the report added, noting “the risk of mass redemptions, like after the Silicon Valley Bank collapse, which could trigger a sell-off in US Treasuries, stress crypto exchanges and ripple through European financial institutions.”
Miran rejected the idea, saying that “because GENIUS Act payment stablecoins do not offer returns and are not backed by federal deposit insurance, I see little prospect of funds largely 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 is increasing the use of stablecoins abroad while eroding the value and liquidity of the assets that support 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 where cross-border trade is becoming more volatile is also one where dollar-tethered tokens are becoming more attractive, as well as more fragile, creating pressures that could push the $310 billion stablecoin sector into global systemic relevance faster than regulators are prepared for, the RBA and BIS agreed.
The RBA notes in an October report that the volume of stablecoins grew by more than 50% in the 12 months to June 2025 and warns of the risks this growth represents. It adds that “industry projections for growth range from $500 billion in 2028 to $4 trillion in 2035”.
The BIS said several industry forecasts put the market at $2 to $3 trillion by 2030, a scale where “even a moderate redemption shock could rival the financial market stress episodes seen in March 2020.”
The Reserve Bank of Australia agrees with Sleijpen, saying: “A sudden drop in sentiment towards stablecoins could trigger a fire sale of assets with the potential to spill over into repo and other US core funding markets.”
Safer than bank
If such a scenario plays out and a fire sale is triggered, the GENIUS Act ensures that the US government will have to bail out stablecoin issuers and their holders on a scale of hundreds of billions of dollars.
But in Coinbase Chief Policy Officer Faryar Shirzad’s opinion, “full reserve support makes stablecoins safer than banking” and their “wider adoption actually strengthens stability.”
He further explained: “banks make long-term, often risky loans to individuals and businesses, exposing 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.”
