Stablecoin Bank Run Could Trigger Fire Sales in Treasuries, BIS Warns

BIS researchers warn that rapidly rising dollar stablecoins are already reshaping U.S. bond markets. As of March 2025, U.S. dollar–pegged stablecoins held $200 Billion in reserves.

In 2024 alone they bought roughly $40 Billion of U.S. Treasury bills – rivaling the purchases of large foreign governments.

Major issuers Tether (USDT) and Circle (USDC) dominate this space. Their inflows and outflows are moving short-term Treasury yields by several basis points.

BIS researchers find that a $3.5 Billion flow into stablecoins (about two standard deviations) lowers 3‑month T‑bill yields by 2–2.5 basis points, while a similar outflow pushes yields up 6–8 bps within ten days.

These asymmetric effects on short‑term rates, the authors note, suggest stablecoins are “significant players in Treasury markets” already.

Stablecoin Issuers are Not Small Fish Anymore…

Between $200-250 Billion is in circulation in the USD-backed stablecoin market. This amount is roughly equal to 5% of the US Treasury debt.

In 2024 alone, stablecoin issuers’ net T-bill purchases ($40 Billion) matched or exceeded those of many foreign central banks.

Stablecoins have exploded in recent years. One analysis found that stablecoin was supply up 140% year-on-year.

Citigroup projects a sevenfold market growth to $1.6 Trillion by 2030. If that happens, issuers would buy roughly $1 Trillion in new Treasury bills (net) by 2030, according to Citi’s estimate.

In July 2025, Congress approved the GENIUS Act (as part of an omnibus funding bill), mandating that U.S. dollar stablecoins be backed 1:1 by cash or liquid assets like short‑term Treasuries.

Treasury advisers note this law will “create a new source of demand for short‑maturity Treasury securities”, even as banks’ demand for debt may fall.

BIS Study: Stablecoin Flows Move T-Bill Yields

The BIS working paper (Ahmed and Aldasoro, May 2025) analyzed daily data from 2021–25. It found that stablecoin purchases and sales already sway T-bill yields.

A $3.5 Billion inflow (roughly two standard deviations) lowers the 3‑month Treasury yield by about 2–2.5 bps over ten days, while a $3.5 Billion outflow raises it by 6–8 bps.

These impacts are concentrated in the short end – the researchers saw no measurable effect on 2‑ or 5‑year yields and only a limited spillover to 10‑year bonds.

In practice, Tether’s USDT drives roughly 70% of the effect, and Circle’s USDC about 19%. The authors concluded that stablecoins have “already established themselves as significant players in Treasury markets.”

Their presence, the paper noted, “blurs the lines between cryptocurrency and traditional finance” and could influence monetary policy pass‑through if stablecoin volumes keep growing.

BIS analysts warned that the net effect of stablecoin flows may understate downside risks in stress events.

Because outflows move yields 2–3 times more than inflows, a run on a major stablecoin could trigger sharp price moves.

The working paper notes, “when market turmoil strikes, large redemptions could force stablecoin issuers to liquidate quickly”. Those sales could depress Treasury prices in a fire-sale spiral.

As one summary puts it, stablecoin balance sheets are “runnable” and concentrated T-bill positions might spark market-wide “fire sales” without a Fed backstop.

Moody’s analysts echo this concern: a sudden stablecoin sell-off “could trigger large-scale liquidations, potentially depressing Treasury prices and disrupting fixed-income markets”.

Stablecoin volumes may also blunt Fed policy. The BIS team notes that heavy offshore demand once caused the 2000s “Greenspan conundrum” (where U.S. yield movements were muted).

They warn that large stablecoin holdings could similarly weaken the Fed’s influence on Treasury yields.

Essentially, BIS researchers caution that their own estimates “may underestimate” the risks a booming stablecoin sector poses to financial stability.

Regulators Sound the Alarm

U.S. policymakers are watching. Fed Governor Chris Waller called stablecoins “private money” in February, which carry run and payment-system risks if left unregulated.

The Federal Reserve Banks of New York and Boston have hosted conferences on stablecoin runs, noting parallels with money‑market fund runs.

The Treasury’s borrowing advisers (the TBAC) highlighted that growing stablecoin issuance “could create a new source of demand” for T-bills even as it diverts deposits from banks.

In Congress, lawmakers have approved clearer rules on stablecoin backing. The new U.S. law requires issuers to hold non‑negative real assets such as dollars, Treasuries or repos.

Supporters say this will expand demand for Treasury bills and help maintain dollar dominance. Critics (like Americans for Financial Reform) warn a stablecoin scramble for safe assets could “create some credit crunches” if liquidations hit banks or funds relying on similar collateral.

Historically, U.S. Treasury markets have shown vulnerability to sudden shocks. The Fed notes that in March 2020, it had to buy “massive amounts” of Treasury debt to stabilize markets at the height of the pandemic sell-off.

Dallas Fed chief Lorie Logan has said the 2020 intervention averted a market “failure”. BIS researchers and regulators worry that a large-scale stablecoin run could represent a new source of such shock.