Experts warn stablecoins like Tether and USDC face liquidity risks

Experts warn that Tether and USDC’s reserve structures, including volatile assets, make them vulnerable to liquidity crises and raise doubts about their reliability as stable, cash-like instruments.

European regulators and institutional investors are intensifying their scrutiny of private stablecoins such as Tether (USDT) and Circle’s USDC, questioning whether they truly function as reliable fiat-pegged cash equivalents. At the Digital Money Summit 2026 in London, experts like Christoph Hock from Union Investment highlighted that the reserve structures of these stablecoins—often including volatile assets such as gold and Bitcoin—make them resemble speculative hedge funds rather than stable, low-risk instruments. The Bank for International Settlements has cautioned that even reserves heavily invested in US Treasury bills may not ensure sufficient liquidity during a crisis. If many holders attempt to redeem their stablecoins simultaneously, the speed of redemption could become a significant problem. With Tether and Circle together controlling nearly 90% of the global stablecoin market, a severe liquidity crunch could have ripple effects beyond the crypto sector. These concerns underscore the vulnerabilities in stablecoins’ economic models and raise questions about their suitability for institutional adoption as safe, cash-like assets.