Regulators Navigate Stablecoin Storm as Dollar’s Role Evolves

Stablecoins May Spark Costly Bailouts, Warns Economist Jean Tirole

The rise of stablecoins is drawing increased scrutiny from economists and policymakers, who caution that widespread adoption could pose systemic risks to global financial systems. While stablecoins offer benefits such as reduced transaction costs and faster cross-border payments, concerns remain about their potential to disrupt traditional financial institutions and expose economies to volatility. Jean Tirole, a Nobel laureate in economics, has warned that the integration of stablecoins into financial markets may necessitate costly bailouts in the event of a crisis.

The GENIUS Act, enacted in July 2025, has provided a regulatory framework for stablecoins in the United States, mandating that they be fully backed by fiat U.S. dollars and short-term Treasury instruments. This legislation aims to bring clarity and oversight to a previously unregulated market, while also fostering innovation and growth. Under the Act, stablecoin issuers must adhere to stringent capital, liquidity, and disclosure requirements. As a result, stablecoins are now positioned as a formal component of the U.S. financial system, with projected market capitalization potentially exceeding $3 trillion by 2030 [1].

Despite these regulatory safeguards, concerns persist about the macroeconomic implications of stablecoin adoption. One key issue is the reallocation of liquidity across balance sheets. As stablecoins become more prevalent, they are shifting funds from traditional bank deposits and money market funds into short-term U.S. Treasuries. This shift could heighten interest rate risk, particularly if the scale of demand for Treasuries grows significantly. Moreover, the non-interest-bearing nature of stablecoins could alter the transmission mechanism of monetary policy, leading to longer lags and reduced efficacy of traditional tools [1].

The global implications of U.S.-denominated stablecoins are also a growing concern. In emerging markets, the proliferation of stablecoins could accelerate unintended dollarization, undermining local monetary policies and increasing susceptibility to currency depreciation. This dynamic creates a complex policy dilemma for central banks, which must balance inflation control, capital outflows, and financial stability. In contrast, developed economies face challenges related to the potential erosion of traditional monetary tools as stablecoins become a dominant settlement currency in tokenized finance [1].

Systemic risk is another critical area of focus. While the GENIUS Act requires stablecoin reserves to be held in high-quality collateral, it does not eliminate the risk of de-pegging or liquidity shocks. Historical data shows that stablecoin issuers have experienced over 600 de-pegs in recent years, raising concerns about their ability to maintain par value under stress scenarios. Additionally, stablecoin issuers lack the same liquidity tools as banks, making them more vulnerable to market disruptions. In the event of a mass redemption, forced asset sales could trigger spikes in Treasury bill yields and disrupt broader financial markets [1].

Policymakers must also consider the broader implications of stablecoins on the principle of “singleness” of money—the idea that all forms of U.S. dollars, whether in bank deposits, cash, or stablecoins, have the same value. As stablecoins gain traction, their inherent counterparty risk may create inefficiencies in the financial system. Without a clear legal framework or systemic backstop, the widespread adoption of stablecoins could introduce new uncertainties into capital flows and market dynamics. These concerns underscore the need for adaptive regulatory approaches that balance innovation with financial stability [1].

Source:

[1] The stablecoin moment (https://www.statestreet.com/jp/ja/insights/stablecoin-moment)