Stablecoins can drain from banks and nations at lightning speed

Stablecoins offer an alternative to slow, business-hour-limited cross-border banking by allowing near-instant transfers and 24/7 settlement. That feature makes them attractive for users who want quick access to dollar-denominated assets or to move money when traditional rails are closed. Because stablecoins can operate without a bank account and bypass some legacy intermediaries, they can appear as a faster, cheaper channel for dollar exposure. Regulators and central banks have flagged two related risks tied to that speed. Over longer periods, steady outflows into stablecoins can erode deposit bases and weaken monetary policy transmission. In more acute episodes, a sudden depeg, issuer shock or banking failure can move capital “at software speed” within hours, potentially triggering runs on banks holding significant stablecoin-related deposits. The March 2023 incident when USD Coin lost its peg after Circle revealed $3.3 billion of reserves at failed Silicon Valley Bank illustrates how a banking collapse can quickly become a stablecoin crisis. Research supports these concerns. A July 2026 BIS review of 130 economies found stablecoin flows and conventional foreign-currency deposits both tend to rise under currency pressure and during banking or sovereign stress, with stablecoins less constrained by capital controls. A separate BIS study covering 2021–2025 reported that surges in demand for dollar stablecoins can depress local currencies and make dollars more expensive in FX swaps, effects that grow when financial intermediaries are already strained. Industry analyses point to Argentina, Nigeria and Turkey as cases where demand for stablecoins is closely tied to demand for dollar exposure. Policymakers are responding by targeting how reserve assets are held. Under current EU Markets in Crypto Assets rules, issuers must keep at least 30% of reserves in bank deposits (up to 60% for large asset-referenced tokens), a structure the European System of Central Banks says creates a mismatch because stablecoins can settle instantly while reserve liquidity follows traditional timelines. The proposal under discussion would shift from fixed deposit percentages to requirements based on how quickly reserve assets can be made available, aiming to reduce the risk of rapid outflows that could drain commercial lenders overnight. At the same time, market participants note stablecoins often act as an intermediary that ultimately converts back into bank deposits, so the net effect depends on flows and redemption behavior rather than the technology alone.