TLDR
- Union Investment’s senior executive claims Tether and USDC don’t qualify as genuine stablecoins because of their exposure to gold and bitcoin reserves.
- Circle’s USDC fell to $0.87 during 2023’s banking turmoil and hit $0.74 three times in March 2024 during market volatility.
- Both companies dominate roughly 90% of the worldwide stablecoin landscape.
- The BIS cautions that substantial Treasury bill holdings might prove insufficient during widespread redemption scenarios.
- American and European authorities are advancing toward implementing banking-equivalent regulations for stablecoin providers.
The stablecoin sector is dominated by two giants: Tether and Circle’s USD Coin. These platforms collectively represent approximately 90% of the entire stablecoin market capitalization. However, an increasing chorus of financial authorities and industry specialists are questioning whether these digital assets deliver the security they promise.
During London’s Digital Money Summit 2026, Christoph Hock — who leads Tokenization and Digital Assets at Union Investment, a German asset management powerhouse overseeing approximately $620 billion — made an unambiguous statement: neither Tether nor USDC functions as a genuine stablecoin.
His critique focused on the underlying collateral structure. Tether maintains substantial positions in gold and bitcoin in addition to government securities. By January 2026, Tether’s gold reserves reached approximately 148 tonnes valued at around $23 billion, positioning the company among the planet’s top 30 gold reserve holders.
According to Hock, this portfolio composition resembles 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 said.
The De-Pegging Risk Is Real
USDC has demonstrated the practical dangers firsthand. During early 2023, following a crypto-focused bank’s failure, USDC’s value plummeted to $0.87. More recently, in March 2024, the token declined to $0.74 on three distinct occasions amid broader market selloffs.
Hock emphasized that such price volatility proves devastating for institutional participants relying on stablecoins for basic overnight settlement operations. A 13% unrealized loss on an instrument designed to function as cash creates unacceptable exposure for corporate treasury departments.
He further highlighted the possibility of government-funded rescue operations, drawing parallels to historical events and cautioning that USDC’s framework could endanger public funds during severe market stress.
Even T-Bills May Not Be Enough
Additional concerns emerged from the Bank for International Settlements. The BIS highlighted that Tether ranked as the seventh-largest purchaser of United States Treasuries throughout 2024, accumulating $33.1 billion in net acquisitions.
Nevertheless, the institution cautioned that maintaining high-quality assets doesn’t address the fundamental challenge: redemption velocity. During a coordinated mass withdrawal, even a portfolio concentrated in Treasury bills might lack sufficient liquidity to accommodate immediate demand.
Conventional money market funds incorporate safeguards specifically designed for such situations — including liquidity charges and withdrawal restrictions. Stablecoin operators presently function without most regulatory protections across numerous jurisdictions.
Regulators Are Moving In
The European Central Bank and Federal Reserve have both identified systemic vulnerabilities. The Fed has additionally observed that consumer migration from traditional bank deposits to stablecoins erodes banks’ funding foundations, introducing fresh complications to the wider financial ecosystem.
Given that two entities command nearly the complete stablecoin marketplace, regulatory bodies across the United States and Europe are advocating for banking-equivalent supervision of stablecoin issuers, encompassing reserve requirements, comprehensive audits, and potential redemption mechanisms.
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