Key Takeaways
- Institutional doubts surrounding USDT and USDC may accelerate adoption of compliant alternatives, but this may reduce market depth.
- The concerns over stablecoin being backed could drive corporate treasuries toward tokenized T-bills, benefiting yield-bearing alternatives.
- Growing regulatory focus on stablecoin reserves increases de-pegging risks for USDT, posing systemic market threats.
At the Digital Money Summit 2026 in London, industry experts highlighted growing institutional scrutiny over private stablecoins, with government regulators in Europe clamping down on illegal digital assets. Christoph Hock, head of Tokenization and Digital Assets at Union Investment—one of Germany’s largest asset managers managing nearly $620 billion—said that stablecoins like Tether (USDT) and Circle’s USDC structurally resemble speculative funds rather than assets pegged to fiat currencies.
“To be honest, a stablecoin, from my perspective, is not a stablecoin,” Hock said. He pointed to Tether’s massive holdings in gold and bitcoin, stating, “They have massive holdings in gold, they have massive holdings in bitcoin.” Hock remarked that this composition makes these stablecoins behave more like hedge funds, exposing corporate treasuries to severe market volatility. He recalled Circle’s USDC de-pegging events, including a 13% drop to 87 cents in 2023 and multiple dips to $0.74 in March 2024, emphasizing the “catastrophic risk” to institutional investors who depend on overnight cash settlement.
Hock also noted that in a liquidity crisis, taxpayers’ money might again be utilized for bailouts, referring to earlier financial crises. He criticized Tether’s allocation of $23 billion in gold reserves—148 tonnes, ranking among the top 30 global holders—as shifting risk from a stablecoin to a stealth hedge fund. Hock’s message was clear: for asset managers, a sudden 13% mark-to-market loss on cash positions is not acceptable, and these stablecoins risk undermining their foundational premise.
Altcoin Market Already Under Pressure
The warning about stablecoin stability comes at a sensitive time for the broader cryptocurrency market. A recent JPMorgan report noted that ether (ETH) and other altcoins are already in a multi-year trend of underperforming bitcoin. JPMorgan’s analysts, led by Nikolaos Panigirtzoglou, said weak network activity, slow growth in decentralized finance (DeFi), and a lack of real-world adoption have weighed on investor demand.
Spot ether ETFs have recovered only about one-third of their prior outflows, compared to a two-thirds recovery for bitcoin ETFs, illustrating the split in investor confidence. Repeated hacks and security breaches have further decreased trust and drained liquidity from altcoin ecosystems. A crisis in the primary stablecoins used for trading and liquidity could significantly worsen existing pressures.
Demand for 24/7 Trading Highlights High Stakes
Despite the structural risks, the demand for the core utility that stablecoins provide—all-day market access—continues to grow. The solid performance of new exchange-traded funds (ETFs) tied to trading platforms like Hyperliquid, which allows 24/7 trading of cryptocurrency, oil, and precious metals, shows the appetite for always-on financial infrastructure.
21Shares global head of research Eli Ndinga noted that traders turned to Hyperliquid during recent global political tensions after traditional markets had closed, with silver trading on the platform at one point representing 2 percent of CME silver volume. This underscores the important role that stablecoins play as the settlement layer for this new financial ecosystem. However, it also raises what’s at stake, as any instability in USDT or USDC could freeze liquidity across these expanding 24/7 markets, triggering cascading failures. The conflict between the market’s demand for constant liquidity and the uncertain stability of the assets providing it remain the central, unresolved risk in the digital asset arena.
