IMF's Strong Bank Run Warning: Are Stablecoins Backed by Bitcoin Really Safe?

▲ Stablecoin

The International Monetary Fund (IMF) has issued a stern warning that stablecoins, which are gaining attention for fast and cheap cross-border transactions, could trigger a large-scale bank run (mass withdrawal event) at any time due to insufficient reserves.

According to DL News on April 12 (local time), the IMF pointed out in a recently published report that without proper regulation, privately issued digital currencies like stablecoins could pose serious potential risks to monetary and financial stability. The institution assessed that while stablecoins have distinct advantages such as low transaction costs and speed, they are defenselessly exposed to the risk of bank runs.

In particular, after former U.S. President Donald Trump signed the GENIUS Act for stablecoin regulation last year, private sector interest has exploded, accelerating the pace of global regulatory authorities. The report highlighted that many issuers hold risky assets as collateral, identifying Tether (USDT), the world's largest stablecoin issuer, holding part of its reserves in volatile Bitcoin (BTC) as a key vulnerability.

A large-scale bank run occurs when investors suspect that the value of the issuer's held assets cannot cover the total amount of redemptions, leading them to withdraw funds in a rush. The IMF cited the failure of Terraform Labs, which collapsed under market pressure after relying on algorithms without secure reserves in the past, and asserted that the only liquid and safe assets that can be universally accepted without question are central bank reserves.

On the other hand, a dilemma exists where filling reserves only with excessively safe assets like government bonds or cash can deteriorate the issuer's profitability and reduce supply. To address this, the IMF advised that central banks should pay interest on reserves or regulatory authorities should allow revenue generation based on settlement data, creating an environment where issuers can be self-sustaining without taking unreasonable risks.

Stimulated by the rapid regulatory moves in the U.S., the European market is also moving quickly. Twelve major European banks, including UniCredit and BNP Paribas, are forming a united front with the goal of launching a Euro-pegged stablecoin within the year to secure institutional investors, fueling the global competition for digital currency dominance.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*