Could Stablecoins Spark a New Contagion? BIS Warns, Coinbase Pushes Back

Group 1 - The potential for a stablecoin run could lead to significant fire sales of U.S. Treasuries, reminiscent of the 2008 financial crisis triggered by Lehman Brothers [1][4] - Recent U.S. tariff threats have caused substantial volatility in the crypto market, with a notable $20 billion loss in under a day following a 100% tariff threat on China [2] - The depeg of USDC in March 2023, following the Silicon Valley Bank failure, exemplifies how real-world financial shocks can lead to rapid redemptions in fiat-backed stablecoins [3] Group 2 - Central bank officials warn that a run on dollar-pegged stablecoins could necessitate a reevaluation of monetary policies due to the potential for fire sales of U.S. Treasury bonds [4] - If tariffs lead to higher yields and lower liquidity, the stability of Treasury bills could be compromised, especially when they are most needed [5] - The stablecoin market is projected to grow significantly, potentially reaching $2 trillion within three years, but there are underlying risks due to the concentration of market control by Tether and Circle [5]