In a significant development at the Digital Money Summit 2026 held in London, experts have warned of increased regulatory attention on private stablecoins, particularly from the European Union. Concerns revolve around the financial instability these coins might introduce into the market.
Is Private Stability at Risk?
Christoph Hock, who leads Tokenization and Digital Assets at Union Investment, criticized the structure of well-known stablecoins such as those from Tether and Circle. As Germany’s premier institutional asset manager with assets nearing $620 billion, Union Investment’s insights are hard to ignore.
“The reserves supporting Tether and Circle resemble investment funds rather than stable currency pegs,” Hock noted, expressing skepticism about their classification as true stablecoins.
Hock emphasized that by holding assets like gold and Bitcoin, the risk level for Tether and USDC mirrors that of hedge funds. Such structures might significantly impact corporate treasuries and institutional investors.
Are Market Fluctuations Endangering Stability?
USDC faced significant value drops, reaching lows of $0.74 multiple times in 2024, driven by banking sector turbulence and Ethereum transaction fee spikes. Notably, the year 2023 saw USDC temporarily plummeting by 13% to 87 cents.
Such volatility has raised alarms, as experts believe these downturns reveal substantial vulnerability for both individual users and large institutions if supporting reserves prove inadequate.
Hock linked sudden liquidity deficiencies during market duress as potential causes for a stablecoin to drift from its value peg, triggering systemic instability as investors rush to cash out.
Highlighting past issues with Circle, Hock suggested that public funds might be necessary during crises to prevent market destabilization, posing a systemic threat to institutional stakeholders.
How Secure Are Tether’s Gold Reserves?
By early 2026, Tether had amassed 148 tons of gold worth $23 billion, placing it among the globe’s top gold reserves, ahead of several countries. Yet, Hock flagged the risk, arguing that a loss over 13% in supposedly stable assets poses dire financial risks, especially for institutional investors wary of balance sheet volatility.
The debate surrounding stablecoins centers on their reserve structures and transparency as European regulations evolve. With warnings over volatility risks when used in corporate structures, digital asset managers advise market participants to tread cautiously.
Privately issued stablecoins holding volatile assets now face scrutiny over their reliability as traditional risk-free instruments. Experts advocate for tougher regulations on reserves and transparency to safeguard stability.
