Major global institutions are warning about the stablecoin industry, as the supply hits $306 billion and as countries rush to issue new rules, including the recently launched GENIUS Act in the United States.
Top Institutions Warn About Safety of Stablecoins
In a statement, Pierre Gramegna, the head of the European Stability Mechanism, warned that the growing use of stablecoin poses a significant risk to the financial system if not properly managed. He said:
“We think that if stablecoins become mainstream, and if they’re not guaranteed as central bank money, then obviously there’s a risk to the whole financial system, not just in Europe, but the whole world.”
Other institutions have also issued warnings on stablecoins, with the International Monetary Fund (IMF) warned that the stablecoin market posed a major risk that could threaten traditional lending and hamper monetary policy. The agency said:
“Because stablecoins may be subject to run risk, fire sales of their reserve assets — such as bank cash deposits and government securities — could spill over into bank deposits and government bond and repo markets.”
Similarly, the Financial Stability Board (FSB) noted that these stablecoins posed a risk, as regulators were unable to fully track these payments and detect associated risks. The Bank of International Settlements and the ECB have also warned about stablecoins in the past.
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Stablecoin Assets Have Hit a $306 Billion Supply
These warnings came as the stablecoin industry continues to expand, with the amount of money locked in these assets surging from $200 billion in January to $306 billion as of today. Tether, the largest player in the stablecoin industry, has over $180 billion in assets, while USDC and Ethena USDe have $75 billion and $12.5 billion, respectively. The other large stablecoins are Dai, Sky Dollar, and Donald Trump’s USD1.
The total amount of money in stablecoins will likely continue growing as a group of large banks like Goldman Sachs, Deutsche Bank, Citigroup, and Santander are working on a new stablecoin.
Analysts believe that stablecoins have a huge potential to disrupt the financial industry as we know it because of their cheaper costs. For example, large companies spend millions of dollars a year in fees using traditional payment methods. This fee can be slashed by over 90% using stablecoins.
Additionally, some retailers, such as Walmart and Amazon, are working on accepting stablecoin, which they believe can save them billions in fees. Today, these companies rely on payment processing firms that charge as high as 3% for payments.
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