Stablecoins Pose ‘Systemic Risk’ To US Banks And Dollar, Former BoE Advisor Warns: ‘They’re Very Bad Customers For The Banking System’
A former Bank of England economist is raising red flags over the growing role of stablecoins in the U.S. financial system, with major implications for banks, as well as the U.S. Dollar.
What Happened: In a recent episode of The Big View by Reuters, Dan Davies, an ex-BoE regulatory economist and veteran bank analyst, compared stablecoin issuers like Circle Internet Group Inc. (NYSE:CRCL) and Tether to banks that lack the oversight and safeguards of traditional institutions.
“These things are basically intrinsically unstable financial structures,” Davies said, noting that their promise of 1:1 redemption in U.S. dollars makes them particularly vulnerable to sudden runs, referring to bank runs, when a large number of individuals try to withdraw their funds from an institution at the same time.
He says, “If you think there’s even a small chance that it [a stablecoin] might be worth 95 cents on the dollar, then you want to get out immediately.”
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