Experts warn unilateral stablecoin moves boost systemic risks via U.S. dollar and Treasury volatility

Experts warn that unilateral efforts by individual nations to promote stablecoins could intensify systemic risks, particularly through volatility spillovers in U.S. Treasury bond markets and the U.S. dollar. Chen Yulu, President of Nankai University, highlighted this concern during the "2025 International Financial Forum," emphasizing how digital currencies are reshaping the global monetary landscape while introducing new vulnerabilities [1]. The remarks underscore a growing debate over the role of stablecoins in financial systems, especially as central bank digital currencies (CBDCs) and privately issued digital assets gain traction.

Chen outlined five critical risks associated with uncoordinated stablecoin initiatives, including the amplification of traditional financial hazards and the creation of regulatory gaps. A key point of concern is the potential for U.S. dollar and Treasury bond fluctuations—already a cornerstone of global financial markets—to ripple into stablecoin ecosystems. Such spillovers could destabilize cross-border liquidity, particularly if stablecoins are perceived as alternatives to traditional reserves. The interconnectedness of digital and traditional finance means volatility in one sector could trigger cascading effects, eroding confidence in both stablecoins and the broader financial system [1].

The expert also stressed the importance of adhering to principles like "intrinsic value," "systemic stability," and "inclusive outreach" to mitigate risks. Chen advocated for a multilateral approach, urging collaboration between CBDC developers and compliant stablecoin projects to create a shared liquidity network. This framework would aim to prevent fragmentation while fostering resilience against shocks. The proposal aligns with broader calls for international coordination in digital finance, reflecting concerns that unregulated or geographically isolated initiatives could undermine global financial stability [1].

While the U.S. dollar’s dominance remains a double-edged sword for stablecoin adoption, the risks of over-reliance on dollar-linked assets are becoming more apparent. As central banks and private entities experiment with digital currencies, the interplay between sovereign policies and market dynamics will shape the trajectory of systemic risk. Chen’s analysis highlights the need for proactive governance to address cross-border challenges, ensuring that the digital transformation of money does not exacerbate existing vulnerabilities [1].

Source: [1] ["2025 International Financial Forum: Chen Yulu on Digital Currency Risks"] (https://www.theblockbeats.info/en/flash/304691)