Stablecoins Endanger Consumers and the Stability of the Financial System

The stability of the U.S. financial system and the broader economy depends on money and payments that people can trust in good times and bad. Stablecoins—crypto tokens that promise to always be redeemable one-for-one for U.S. dollars—are being rapidly integrated into the banking system without the safeguards that make that promise credible.  Stablecoins are structurally similar to money market mutual funds, which required emergency government rescues in 2008 and again in March 2020 because their capital-thin structures and insufficient liquid assets could not absorb even modest shocks during stress.

Stablecoins Can Fail Fast—Leaving Consumers Unprotected

In March 2023, the stablecoin USDC—a stablecoin largely backed by U.S. Treasury securities and uninsured bank deposits—lost its dollar peg within hours after it was disclosed that $3.3 billion of its reserves were held at the failed Silicon Valley Bank. Unlike bank deposits, stablecoins carry no federal insurance, and because they can be redeemed 24 hours a day, 7 days a week, they reward whoever runs first—a self-reinforcing dynamic once any doubt about reserve quality emerges.

The Federal Government’s Rushed Rulemaking Process is Creating Dangerous Regulatory Gaps

Congress passed the GENIUS Act in July 2025, directing the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), National Credit Union Administration (NCUA), and the Treasury Department (Treasury) to build a regulatory framework for stablecoin issuers on an extraordinarily compressed timeline, with final rules required by July 18, 2026. The OCC, FDIC, NCUA, and Treasury have each raced out proposals—and each proposal has included the same fundamental mistakes that would create a weak regulatory framework for stablecoins.

The Banking Agencies’ Proposals Ignore Key Lessons From Past Financial Crises

The agencies have proposed no meaningful capital or liquidity standards. Instead, they rely on vague supervisory discretion and only de minimis requirements, impose inadequate reserve diversification requirements that ignore the lessons of the 2023 banking crisis, and provide no coordinated analysis of the financial stability risks that a large stablecoin market would create. The agencies’ proposals likewise contain no protections for if or when stablecoins are used as a means of household payments—something the stablecoin industry and its supporters have stated as an aspiration.

Better Markets expressed views on the shortcomings of the GENIUS Act, but since its adoption has continued to fight for the strongest possible safeguards during its implementation, filing detailed comment letters with the OCC, the FDIC, the Treasury, and the NCUA. Our letters call on the agencies to establish binding, size-scaled capital requirements; mandatory reserve concentration limits; liquidity requirements; and assess the financial stability risks, risks to banks and credit unions that sponsor stablecoins, and perform cost-benefit analyses.

Main Street Will Ultimately Pay the Price for Crypto’s Expansion Into Banking

If these rules are finalized as proposed, the costs of a stablecoin failure will fall on bank depositors, credit union members, the federal insurance funds that protect them, and ultimately taxpayers—just as the failures of undercapitalized, run-prone financial products have in every prior crisis. That’s why Better Markets will continue fighting for a stablecoin framework that protects Main Street rather than importing crypto’s volatility into the heart of the banking system. Please see the links below for our resources and analysis on stablecoins and the GENIUS Act, organized by agency.

Better Markets’ Resources on Stablecoins

OCC

• The OCC’s proposal for national bank stablecoin issuers fails to establish meaningful capital and liquidity requirements, relies on supervisory discretion in place of binding standards, and ignores the financial stability risks of a stablecoin market its own proponents predict could grow into the trillions of dollars. Read our press release and comment letter (May 4, 2026).

FDIC

• The FDIC’s GENIUS Act standards proposal would recklessly import crypto’s volatility into the federal deposit insurance safety net, with no binding capital minimums, weak reserve requirements, and an auto-approval clock that pressures the agency to approve applications it cannot properly evaluate. Read our press release and comment letter (June 9, 2026).
• The FDIC’s earlier proposal on approval requirements for stablecoin issuance by bank subsidiaries prioritizes industry convenience over economic stability for Main Street. Read our press release and comment letter (May 18, 2026).

Treasury

• The Treasury’s proposed principles for certifying state stablecoin regimes as “substantially similar” to the federal framework would open the door to a race to the bottom, allowing issuers to shop for the weakest regulator while their risks remain to the U.S. financial system. Read our comment letter (June 2, 2026).

NCUA

• The NCUA’s proposal would bring crypto’s risks into credit unions without strong guardrails—repeating the capital, liquidity, and reserve deficiencies of the other agencies’ proposals. The proposal would also create risks unique to credit unions’ cooperative ownership model. Read our press release and comment letter (July 17, 2026).

Stablecoin Risks and GENIUS Act Background

• Substack on why large banks may bail out their stablecoins in stress (August 20, 2026)
• GENIUS Act primer on Big Tech’s use of stablecoins with Better Markets’ views on the legislation (May 2025).
• The myths about stablecoins—that they are fully safe, fully backed, and fully harmless—do not survive contact with reality. Read our Open Banker op-ed (March 20, 2025).