Key Takeaways
- Union Investment’s senior executive labeled Tether and USDC as “not true stablecoins” citing their exposure to gold and bitcoin holdings.
- USDC experienced significant de-pegging events, falling to $0.87 in 2023 and $0.74 three times in 2024 during market volatility.
- Nearly 90% of the worldwide stablecoin market is dominated by Tether and Circle.
- The Bank for International Settlements cautions that Treasury-heavy portfolios might fail during simultaneous mass withdrawals.
- US and European authorities are advancing toward implementing banking-level regulations for stablecoin operators.
The stablecoin landscape is dominated by two major players: Tether and Circle’s USD Coin. These digital currencies represent approximately 90% of all stablecoin value currently in circulation. However, an increasing chorus of financial authorities and industry professionals are questioning whether these assets truly deliver the security 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 powerhouse overseeing approximately $620 billion — delivered a stark assessment: Tether and USDC cannot be classified as genuine stablecoins.
Hock’s critique centered on their underlying reserve assets. Tether maintains substantial positions in gold and bitcoin in addition to its Treasury bill holdings. By January 2026, Tether’s gold reserves reached approximately 148 tonnes, valued at around $23 billion, positioning the company among the world’s top 30 gold holders.
According to Hock, this asset composition makes Tether resemble a speculative investment vehicle rather than a reliable cash alternative. “When looking at the invested assets of Tether, they have massive holdings in gold, they have massive holdings in bitcoin,” he stated.
De-Pegging Events Demonstrate Vulnerability
USDC has already demonstrated the potential dangers. Following the failure of a cryptocurrency-affiliated bank in early 2023, USDC’s value plummeted to $0.87. Subsequently, in March 2024, it declined to $0.74 on three distinct occasions amid broader market turbulence.
Hock emphasized that such price volatility is devastating for institutional participants relying on stablecoins for routine overnight cash operations. A 13% markdown on an asset intended to function as stable cash creates unacceptable exposure for corporate treasury departments.
He additionally highlighted the possibility of government-funded rescues, referencing historical precedents and cautioning that USDC’s framework could endanger public finances during a severe crisis.
Treasury Bills Alone Won’t Guarantee Safety
The Bank for International Settlements issued a complementary warning. The BIS noted that Tether emerged as the seventh-largest accumulator of US Treasury securities in 2024, purchasing a net $33.1 billion throughout the year.
However, the institution cautioned that maintaining safe-haven assets doesn’t address the fundamental challenge: redemption velocity. Should substantial numbers of users attempt simultaneous withdrawals, even Treasury-dominated portfolios may lack sufficient liquidity to fulfill requests promptly.
Conventional money market funds incorporate safeguards specifically designed for such scenarios — including liquidity charges and withdrawal restrictions. Stablecoin issuers presently function largely without these regulatory frameworks in most jurisdictions.
Regulatory Pressure Intensifies
Both the European Central Bank and the Federal Reserve have identified systemic vulnerabilities. The Fed has additionally observed that when consumers shift savings into stablecoins rather than traditional bank deposits, financial institutions lose critical funding mechanisms, generating additional risks throughout the financial ecosystem.
Given that two corporations control virtually the entire stablecoin sector, regulators across the US and Europe are now advocating for banking-level supervision of stablecoin providers, encompassing reserve requirements, comprehensive audits, and potential withdrawal management protocols.
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