{"id":45425,"date":"2025-09-03T05:31:31","date_gmt":"2025-09-03T05:31:31","guid":{"rendered":"https:\/\/dogewisperer.com\/?p=45425"},"modified":"2025-09-03T05:31:31","modified_gmt":"2025-09-03T05:31:31","slug":"insufficient-stablecoin-supervision-nobel-economics-laureate-warns-of-potential-financial-crisis","status":"publish","type":"post","link":"https:\/\/dogewisperer.com\/?p=45425","title":{"rendered":"Insufficient Stablecoin Supervision? Nobel Economics Laureate Warns Of Potential Financial Crisis"},"content":{"rendered":"
\n

As stablecoin\u2019s momentum continues to surge worldwide, 2014 Nobel Prize-winning economist Jean Tirole recently warned about the risks of a potential financial crisis due to the \u201cinsufficient supervision\u201d in the sector.<\/p>\n

Economist Warns Of Multibillion-Dollar Crisis<\/h2>\n

On Monday, Jean Tirole shared his concerns about inadequate stablecoin oversight amid the recent momentum in the sector, affirming that he was \u201cvery, very worried\u201d about the lack of sufficient supervision and the potential hidden risks that it could entail.<\/p>\n

In an interview<\/a> with the Financial Times (FT), the professor at the Toulouse School of Economics warned of the possibility that governments could be forced into \u201cmultibillion-dollar bailouts\u201d if the digital assets, which are considered \u201ca perfectly safe deposit\u201d by retail traders, unravel in a future financial crisis.<\/p>\n

He also cautioned that backing stablecoins with US government bonds could become unpopular due to the underlying assets\u2019 relatively low yields, noting previous cases when the returns of Treasury debt were negative for several years and payouts after inflation were even lower.<\/p>\n

Notably, digital assets pegged to the US dollar are required to be backed on a one-to-one\u00a0basis by US dollars or Treasury bills after the enactment of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act in July.<\/p>\n

As reported<\/a> by Bitcoinist, US Treasury Secretary Scott Bessent is allegedly \u201cbetting\u201d on the crypto industry to become a key buyer of US Treasuries in the coming years. According to a previous FT report, Bessent has signaled to Wall Street that he expects the industry to \u201cbecome an important source of demand for US government bonds\u201d as Washington seeks to bolster demand for a surge of new US government debt.<\/p>\n

The Treasury Secretary has reportedly contacted leading stablecoin\u00a0issuers, like Circle and Tether<\/a>, for information, signaling the Treasury Department\u2019s alleged plans to increase sales of short-term bills for the coming quarters. Nonetheless, the Global Chief Economist at financial services firm UBS, Paul Donovan, doesn\u2019t believe that the sector will boost the demand for US government bonds.<\/p>\n

Donovan considers that \u201cstablecoins are more about redistributing the money supply,\u201d adding that \u201csomeone selling Treasury bills to buy stablecoins, which invest the money in Treasury bills, does not change demand for U.S. debt instruments.\u201d<\/p>\n

Better Stablecoin Oversight Required<\/h2>\n

Following the global push for the sector, the stablecoin market<\/a> has risen to over $280 billion. Last month, Goldman Sachs affirmed that the industry is \u201cat the beginning of a stablecoin gold rush,\u201d which could potentially bring the global market to trillions of dollars.<\/p>\n

Tirole considers that stablecoin issuers could be \u201clured into the temptation\u201d to invest in other assets that \u201ccarry higher returns and are riskier.\u201d The higher risk would increase the chance of a potential crisis, triggering a run on the tokens.<\/p>\n

\u201cIf it is held by retail or institutional depositors who thought it was a perfectly safe deposit, then the government will be under a lot of pressure to rescue the depositors so they don\u2019t lose their money,\u201d he detailed, adding that only a few uninsured depositors of traditional banks ever faced losses over the past decades.<\/p>\n

The economist explained that the potential risks could be managed if global supervisors had enough resources and were incentivized to act carefully. However, he warned<\/a> this was a \u201cbig if,\u201d citing personal and political interests of members of \u201csome key members of the [US] administration.\u201d<\/p>\n

Nonetheless, the US\u00a0Treasury Secretary considers that the recent regulatory advancements are sufficient to drive the sector\u2019s growth. \u201cThe GENIUS Act provides the fast-growing market with the regulatory clarity it needs to grow into a multitrillion-dollar industry,\u201d Bessent said in July.<\/p>\n

\"stablecoin,<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

As stablecoin\u2019s momentum continues to surge worldwide, 2014 Nobel Prize-winning economist Jean Tirole recently warned about the risks of a potential financial crisis due to the \u201cinsufficient supervision\u201d in the sector. Economist Warns Of Multibillion-Dollar Crisis On Monday, Jean Tirole shared his concerns about inadequate stablecoin oversight amid the recent momentum in the sector, affirming […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"iawp_total_views":0,"footnotes":""},"categories":[2],"tags":[3,4,5],"class_list":["post-45425","post","type-post","status-publish","format-standard","hentry","category-news","tag-crypto","tag-doge","tag-news"],"_links":{"self":[{"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/posts\/45425","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=45425"}],"version-history":[{"count":0,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/posts\/45425\/revisions"}],"wp:attachment":[{"href":"https:\/\/dogewisperer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=45425"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=45425"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=45425"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}