Friday, July 18, 2025

The Rise of Stablecoins/Cryptos and Financial Stability Concerns


The coming crypto crisis
https://www.ft.com/content/efc848c0-0990-4623-98ed-1176e97f04cb
Advocates talk about cryptocurrencies such as bitcoin as a hedge against traditional markets, but in fact, bitcoin is a “high beta” investment, meaning that it is highly correlated to the stock market. That means that both gains and losses relative to the S&P are amplified. Anything over a beta of one indicates a higher volatility than the market. A recent Fidelity report found bitcoin’s rolling 3-year beta to the S&P was 2.6. 

Stablecoins: the next big financial crisis waiting to happen
https://www.telegraph.co.uk/business/2025/07/27/are-stablecoins-the-next-big-financial-crisis-waiting-to-ha/
Loosening the regulations governing digital currencies involves Wild West trade-offs.

Can Markets Trust Stablecoins?
https://www.wsj.com/opinion/can-markets-trust-stablecoins-finance-investing-economy-policy-c03e0f1d
The Genius Act brings more order to crypto, but the new currency it enables dresses old risks in new tech.

Why Banks Are on High Alert About Stablecoins
https://www.wsj.com/finance/currencies/why-banks-are-on-high-alert-about-stablecoins-2f308aa0
Banks fear the tokens could siphon deposits they use to fund loans to companies and consumers. 

The rise and risks of stablecoins
https://www.ft.com/content/b3063d9a-d161-4dda-96bb-ea0dfaa2488d
US law bringing the asset into the mainstream has dangers for financial stability.

Crypto’s big bang will revolutionize finance
https://www.economist.com/finance-and-economics/2025/07/23/cryptos-big-bang-will-revolutionise-finance
The more useful stablecoins and tokens prove to be, the greater the risk.

Stablecoins Fall Short as Cornerstone of Monetary System, Central Banks Say
https://www.wsj.com/economy/central-banking/stablecoins-fall-short-as-cornerstone-of-monetary-system-central-banks-say-e0b33e70
Loss of monetary sovereignty and capital flight are major concerns, particularly for emerging markets.



Why Passing the Stablecoin GENIUS Act Might Not Be So Smart
https://www.newyorker.com/news/the-financial-page/why-passing-the-stablecoin-genius-act-might-not-be-so-smart
Critics say enacting the pro-crypto legislation will make the financial system less safe and less stable—and further enrich Donald Trump.


How Stablecoins Can Be Destabilizing
https://www.wsj.com/finance/banking/how-stablecoins-can-be-destabilizing-c14a98b0
Banks will retain lots of deposits, but they might become bigger and less reliable. 

Stablecoin Legislation Will Juice Demand for Treasurys—to a Point
https://www.wsj.com/finance/stablecoin-legislation-will-juice-demand-for-treasurysto-a-point-3724fad7
Issuers of digital currencies need Treasury bills for their reserves, but analysts say the consequences are uncertain.