Key Takeaways
- Union Investment’s senior executive challenged the classification of Tether and USDC as genuine stablecoins, citing their exposure to gold and bitcoin assets.
- USDC experienced significant de-pegging in 2023, falling to $0.87 amid banking turmoil, with further drops to $0.74 in March 2024.
- Tether and Circle maintain a combined market dominance of approximately 90% in the global stablecoin sector.
- The Bank for International Settlements cautions that Treasury-heavy portfolios may prove insufficient during large-scale redemption scenarios.
- Banking-style regulatory frameworks for stablecoin issuers are gaining momentum across US and European jurisdictions.
The stablecoin landscape is dominated by two giants: Tether and Circle’s USD Coin. Their combined market share represents approximately 90% of all circulating stablecoin value. However, an increasing chorus of financial authorities and industry veterans is questioning whether these digital assets deliver the stability they promise.
During the Digital Money Summit 2026 held in London, Christoph Hock — who leads Tokenization and Digital Assets at Union Investment, a German asset management firm overseeing nearly $620 billion — delivered a striking assessment: Tether and USDC don’t meet the criteria for authentic stablecoins.
The critique centered on reserve composition. Tether‘s holdings extend beyond traditional Treasury securities to include substantial positions in gold and bitcoin. According to January 2026 data, Tether’s gold reserves reached approximately 148 tonnes, representing roughly $23 billion in value and placing the company among the world’s top 30 gold holders.
Hock contended that these holdings transform Tether into something resembling a speculative investment vehicle rather than a reliable cash substitute. “When looking at the invested assets of Tether, they have massive holdings in gold, they have massive holdings in bitcoin,” he stated.
Historical De-Pegging Events Highlight Vulnerability
USDC‘s track record demonstrates concrete instability. Following the failure of a crypto-focused banking institution in early 2023, USDC’s value plummeted to $0.87. Additional volatility emerged in March 2024, when the stablecoin fell to $0.74 on three distinct occasions during broader market turbulence.
Hock emphasized that such price swings create unacceptable risk for institutional participants relying on stablecoins for overnight liquidity management. A 13% loss on what should function as a stable cash equivalent represents an intolerable outcome for corporate treasury operations.
He further highlighted potential taxpayer exposure, drawing parallels to historical financial rescues and suggesting that USDC’s operational framework could necessitate public intervention during severe market stress.
Treasury Holdings Don’t Guarantee Liquidity
The Bank for International Settlements issued its own cautionary analysis. The BIS noted Tether’s emergence as the seventh-largest acquirer of US Treasury securities throughout 2024, accumulating $33.1 billion in net positions during the period.
Despite this seemingly conservative approach, the BIS identified a fundamental vulnerability: liquidation timing. During mass redemption events, even portfolios concentrated in Treasury bills may fail to convert to cash quickly enough to satisfy withdrawal demands.
Conventional money market funds maintain specific safeguards against such scenarios — including liquidity fees and redemption restrictions. Most stablecoin operators currently function without comparable regulatory requirements across major jurisdictions.
Regulatory Pressure Intensifies
Central banking authorities including the European Central Bank and the Federal Reserve have identified systemic vulnerabilities. The Fed has specifically highlighted how consumer migration from traditional bank deposits to stablecoins erodes bank funding stability, introducing new fragilities into the financial ecosystem.
Given the concentrated market power held by just two entities, regulatory bodies in both the United States and Europe are advancing proposals to impose bank-equivalent oversight on stablecoin issuers, encompassing reserve requirements, mandatory audits, and potential redemption restrictions.
