Stablecoins Could Cost Governments Billions, Economist Warns (2025)

Tirole cautioned that while retail investors see stablecoins as safe deposits, failing reserves could turn them into losses requiring government bailouts.

Jean Tirole, a Nobel Prize-winning economist, has warned that weak oversight of stablecoins could one day leave governments footing multibillion-dollar bailouts if the tokens unravel during a financial crisis.

In an interview with the Financial Times, Tirole said he was “very, very worried” about how stablecoins are supervised. He cautioned that a loss of confidence in their reserves could spark a rush of withdrawals, undermining the peg to traditional assets.

Stablecoins such as those issued by Tether and Circle are digital currencies pegged to real-world assets like the US dollar. They are usually backed by reserves that include cash, Treasury bonds or other securities.

Growth Projections Range From $500B To $3.7T For Stablecoins

Global use of stablecoins has already grown to about $284b. Analysts at Citi forecast the market could expand to $1.6 trillion by 2030, with an optimistic scenario pushing it as high as $3.7 trillion. A bearish view suggests growth could stall near $500b.

Meanwhile, the US Treasury projects the market could reach US$2 trillion by 2028.

Tirole, who won the Nobel Prize in Economics in 2014 and teaches at the Toulouse School of Economics, said retail investors often view stablecoins as “a perfectly safe deposit.”

Yet he warned they could quickly become a source of losses and trigger government rescues if reserves falter.

Falling Reserves May Trigger A Run On Tokens

He pointed to the drawbacks of holding US government bonds, a common reserve asset for stablecoin issuers. Yields on Treasuries have at times turned negative once adjusted for inflation, making them unattractive to issuers seeking higher returns.

That search for better performance could tempt issuers to shift into riskier assets, Tirole said. Such a move would heighten the chance of losses in reserve portfolios, potentially sparking a run on the tokens.

In that scenario, stablecoins could fall below their peg to sovereign currencies, further eroding confidence. Tirole warned that stablecoins could also lose value their value.

Effective Oversight Requires Resources And Incentives: Tirole

both retail and institutional investors suffered losses, governments would face mounting pressure to intervene, he added.

Over recent decades, only a small number of uninsured depositors in traditional banks have borne losses, the economist noted. This history, he argued, raises expectations that governments would again step in to prevent savers from being wiped out.

The economist said these risks could be contained if supervisors had enough resources and incentives to act diligently. However, he doubted whether that standard was being met, citing the political and financial interests of some members of the US administration in crypto.

The debate comes as stablecoins continue to anchor much of global crypto trading. Supporters see them as essential for bridging fiat and digital finance, while critics worry about the lack of transparency and the potential burden on taxpayers if a collapse occurs.