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Financial Stability

Every Crypto Coin Show story tagged Financial Stability, newest first, alongside the guides and interviews that give it context.

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Fed stablecoin rule leaves 76 billion dollars trapped at exchanges
Regulation & Policy

Fed stablecoin rule leaves 76 billion dollars trapped at exchanges

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Editor's ChoiceCrypto Coin Show News Team·September 29, 2026·4 min read

The Federal Reserve Board’s proposal to force a two-business-day redemption floor on supervised stablecoin issuers leaves the exchange layer, where most holders actually try to cash out, governed by separate contracts. New data from the Andersen Institute for Finance and Economics show $76 billion of reserve-backed stablecoins sitting at centralized exchanges, where Circle, Coinbase and Tether each impose their own eligibility rules before an issuer’s clock even starts.

  • The Fed’s proposal, published in the Federal Register on Tuesday, September 29, 2026, would cap issuer redemption at two business days under proposed section 247.12.
  • The Andersen Institute’s July 28, 2026 snapshot found $76 billion at exchanges, including $61.5 billion of USDT and $10.1 billion of USDC.
  • During the March 2023 USDC stress episode, exchanges held just 15.2% of USDC supply but absorbed 40% of the token’s total outflow.
  • 2 days Fed’s proposed ceiling on issuer redemption turnaround
  • $76B stablecoins parked at exchanges versus $269.4B total supply
  • 40% share of USDC’s 2023 outflow tied to exchanges holding 15.2% of supply

The Federal Reserve Board announced on Thursday, September 24, 2026, that it would require stablecoin issuers under its supervision to honor redemption requests within two business days. The Board formalized the plan in a filing published in the Federal Register five days later, on September 29.

Proposed section 247.12 would require a Board-supervised issuer to disclose its redemption procedure and accept requests for at least one token, subject to onboarding and screening checks. The Board can extend that window for safety, financial stability or public interest reasons, and the proposal carves out limited safe harbors for delays tied to required customer checks.

Andersen Institute Finds $76 Billion Sitting at Exchanges, Not With Issuers

Researchers at the Andersen Institute mapped supply across 12 reserve-backed dollar stablecoins and found that centralized exchanges held $76 billion as of their July 28, 2026 snapshot. USDT accounted for 81% of the exchange total.

The institute calls its exchange figure a lower bound because some exchange wallets cannot be identified. It also found the intermediated share of total supply, meaning tokens locked in exchanges or DeFi contracts rather than sitting in unattributed wallets, has climbed to 47.8% from an average of 42.8% in 2023, even as aggregate stablecoin supply has stayed roughly flat since October 2025.

Roughly $20 billion moved out of DeFi protocols and into exchanges and unlocated wallets over that same stretch, according to the report, a reallocation the aggregate figure alone would not reveal.

Lending protocols that absorb part of that flow, such as those under review in Aave’s governance discussions on a V4 lending framework, held $21 billion of stablecoins in the Andersen snapshot. That is a fraction of the $76 billion parked at exchanges, underscoring where redemption pressure would concentrate first.

Circle, Coinbase and Tether Each Guard Their Own Exit Door

The Fed’s two-day clock only applies once a qualifying redemption request reaches a supervised issuer. Getting there first requires clearing a venue’s own terms, an analytical gap that CryptoSlate’s reporting laid out by comparing the three largest platforms’ agreements directly.

Circle’s USDC terms make direct redemption available to an eligible holder with a Circle Mint account in good standing; a holder without that account cannot redeem directly with Circle until eligible and registered, as the firm describes Mint as a service for institutional distributors. Coinbase’s US user agreement states that a customer owns the balance in a USDC wallet but that Coinbase is not obliged to repurchase it for dollars; it may choose to, and otherwise directs customers to redeem with Circle under Circle’s separate terms.

Tether’s current terms require a verified customer and impose a $100,000 minimum for direct redemption, a threshold that filters out most retail holders entirely.

March 2023 USDC Run Shows How Fast Exchange Pressure Can Reverse

The Andersen data trace the last major stress test in detail. From March 10 to 13, 2023, total USDC supply fell $2.7 billion while identified exchange balances actually rose $600 million, meaning tokens moved onto exchanges even as overall supply contracted.

After March 13, the pattern flipped: supply fell another $8.1 billion while exchange balances dropped $4.9 billion, the sharper decline that ultimately produced the 40% exchange share of total outflow.

That single episode offers limited guidance for how USDT or the other ten coins in the Andersen dataset would behave under a future shock, since wallet-location data cannot reveal the order or size of individual redemption requests. The Fed’s proposal remains open for public comment, with no closing date specified in the filing.

The CCS read. The Fed’s two-day rule protects the issuer relationship but does nothing for the exchange leg where 28% of supply actually sits, so institutional desks holding stablecoins on venues still face Circle’s Mint gate, Coinbase’s discretionary repurchase and Tether’s $100,000 floor regardless of what the Board finalizes. Treasury and risk teams should keep pricing exchange counterparty risk separately from issuer risk.

The Fed’s proposal remains under public comment with no stated deadline, leaving open whether the final rule will address the exchange-to-customer leg at all or stop, as drafted, at the issuer’s

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The US debt machine is getting harder to stabilize – So where does Bitcoin fit in?
Bitcoin

The US debt machine is getting harder to stabilize – So where does Bitcoin fit in?

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BitcoinMay 30, 2026·6 min read

The US Treasury market, foundational to global finance, faces structural strains as debt crosses $30.2 trillion and foreign central banks withdraw support, forcing private investors, including crypto firms issuing stablecoins, to absorb record refinancing needs. For institutional crypto investors, this shift reveals why decentralized monetary alternatives and stablecoin collateral strategies are gaining institutional traction as hedges against Treasury market dysfunction.

  • Total marketable Treasury debt doubled since 2018 to $30.2 trillion by end of fiscal 2025, with the US running a $1.8 trillion deficit that year alone.
  • Foreign central banks reduced Treasury holdings while the Federal Reserve shrunk its balance sheet from $8.5 trillion peak, leaving private markets to absorb record refinancing demand.
  • Nearly $3 trillion of Treasury debt matured in 2025 requiring fresh buyers, intensifying pressure on a shrinking pool of private capital sources to maintain market stability.
  • $30.2T Total US marketable Treasury debt versus $15T in 2018
  • $1.8T US budget deficit in 2025 versus historical averages
  • $3T Treasury debt maturing in 2025 requiring immediate refinancing

The US Treasury market has entered uncharted structural territory. As marketable debt crossed $30.2 trillion by the end of fiscal 2025, more than double the $15 trillion level in 2018, the traditional buyer base that once absorbed American government borrowing has fractured. Foreign central banks, historically the anchor demand for US debt, have been steadily reducing holdings.

The Federal Reserve, having swollen its balance sheet to $8.5 trillion during successive rounds of quantitative easing through 2022, has since begun an unwinding process it lacks clear institutional capacity to reverse without triggering market stress.

The result is clear: private capital markets must now fill a financing gap that sovereign and central bank buyers once handled, at precisely the moment when debt service costs have exploded and refinancing calendars have accelerated.

The arithmetic alone reveals the scale of the challenge. In fiscal 2025, the US ran a $1.8 trillion deficit while paying more than $1 trillion in interest on publicly held debt for the first time ever, surpassing both defense spending and Medicare in a single budget cycle.

Nearly $3 trillion of Treasury obligations matured in 2025 alone, each dollar requiring a fresh buyer willing to lend to the US government.

This combination, rising deficits, elevated bond yields, and shrinking traditional demand, has exposed what Wall Street is only now openly discussing: whether the Treasury market has become too large, too leveraged, and too systemically important to function without continuous Federal Reserve intervention.

Fed emergency purchases set precedent that regulators now cannot unwind

The modern Treasury market’s structural fragility became visible during two acute crises that forced the Federal Reserve into historically unprecedented interventions.

The September 2019 repo market freeze revealed hairline fractures in short-term funding infrastructure: overnight lending markets seized without warning, and the Fed was compelled to inject emergency liquidity within days to restore basic market functioning. But that episode, serious as it was, proved a mild rehearsal for March 2020.

When COVID-19 struck in March 2020, institutional investors executed a simultaneous liquidation of Treasury securities, the asset class long treated as the world’s safest, alongside equities and everything else.

Researchers at the Brookings Institution later documented how bond market liquidity simply evaporated as dealers withdrew from order matching and prices dislocated wildly from fundamentals. The Federal Reserve responded with emergency purchases of historic scale, deploying tools and capital commitments that functionally rewrote central banking doctrine.

Those interventions worked: market functioning restored within weeks, prices stabilized, and the immediate crisis passed.

But the precedent set in March 2020 has proven impossible to reverse. Each time the Fed signals a reduction in balance sheet support, whether through quantitative tightening or forward guidance hinting at eventual policy normalization, Treasury markets exhibit stress: bid-ask spreads widen, dealer inventory capacity contracts, and prices gap sharply on modest volume.

Regulators have watched this pattern repeat enough times to recognize the uncomfortable truth: the market has become structurally dependent on Fed support to function at current debt levels. Walking away from that support risks triggering the very dislocation the Fed has spent five years preventing.

Hedge funds’ basis trading strategy amplifies leverage in the Treasury system

Beneath the visible stress episodes lies a structural feature that regulators have grown increasingly alarmed about: the proliferation of leveraged arbitrage strategies concentrated among a handful of large hedge funds.

The cash-futures basis trade, a complex leveraged wager on minute pricing discrepancies between Treasury spot and futures markets, has become central to how modern Treasury trading operates.

Hedge funds exploit tiny basis gaps, often measured in basis points, by borrowing massive quantities of debt securities, simultaneously selling them while buying futures contracts, and capturing the microscopic spread as it converges.

The strategy is self-reinforcing in normal markets and catastrophic during stress episodes. When basis widens beyond theoretical arbitrage bounds, as happened during both the 2019 repo freeze and the March 2020 liquidation, hedge funds face forced deleveraging and margin calls on positions that can number in the hundreds of billions of dollars.

Because these positions are often financed through repo markets and dealer intermediaries, the cascade accelerates rapidly. A widening basis that should theoretically attract fresh capital instead triggers algorithmic selling, dealer flight, and an erosion of market liquidity precisely when it’s most needed.

The structure creates a feedback loop: as hedges unwind, basis widens further, forcing more unwinds, until the Fed steps in with emergency purchases to restore pricing.

The systemic danger lies in concentration and leverage stacking. A small number of large hedge funds control Treasury basis positions so large that their collective financing needs dominate dealer balance sheet capacity.

When those funds face simultaneous stress, whether from margin calls, redemptions, or volatility spikes, the dealer system lacks capacity to absorb flows without cascading dislocations. Regulators have identified this vulnerability repeatedly in post-crisis examinations, yet the regulatory toolkit to address it remains limited.

Leverage limits would reduce arbitrage capacity; dealer capital requirements were already raised post-2008. The result is a market structure that is operationally fragile at current debt issuance levels.

Stablecoin issuers and private capital now absorb Treasury demand foreign central banks abandoned

As traditional buyers retreated, an unexpected category of private capital emerged to absorb Treasury supply: stablecoin issuers and cryptocurrency-adjacent financial firms. Major stablecoin operators, particularly those issuing dollar-backed tokens at scale, began holding significant Treasury allocations to back reserve requirements.

What began as a technical necessity, maintaining collateral backing for circulating stablecoin supply, has evolved into a material source of Treasury demand that now competes with traditional asset managers and hedge funds for available supply.

Stablecoin Treasury holdings remain modest in absolute terms compared to the $30.2 trillion market, but their marginal role in absorbing supply has become strategically significant. As foreign central banks reduced holdings and the Fed executed quantitative tightening, stablecoin operators and crypto-native financial platforms stepped into a demand gap.

The Tether Corporation and Circle, the two largest stablecoin issuers by circulating supply, hold billions in Treasury securities as collateral reserves. Their participation in Treasury markets has forced traditional banking and asset management firms to acknowledge that cryptocurrency infrastructure had become, quietly and structurally, part of the Treasury market’s equilibrium.

This shift carries implications for institutional crypto investors watching bond market stability. Stablecoin demand for Treasuries is not purely financial; it reflects an emerging institutional recognition that decentralized and crypto-native financial infrastructure provides redundancy against traditional banking system shocks.

When stablecoin issuers are forced to defend their reserves during market stress, as Circle’s USD Coin issuers faced pressure to do during banking sector turmoil in early 2023, they have leverage to negotiate with Treasury dealers and central bank counterparties.

For institutional investors building crypto-native treasuries and collateral strategies, this means that Treasury allocation decisions are no longer purely about yield; they’re now architectural decisions about system resilience.

Mounting debt service costs squeeze fiscal capacity and test investor appetite for duration risk

Interest costs on the national

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Blockchain

IMF Warns Tariffs Fall Short as Global Trade Gaps Widen

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BitcoinApril 6, 2026·5 min read

The International Monetary Fund has concluded that tariffs fail to meaningfully reduce trade deficits, while global current account imbalances are widening again, a combination that historically precedes financial crises and capital flight. For institutional investors, this structural instability creates conditions where alternative assets like Bitcoin and stablecoins may attract growing demand as traditional policy tools prove insufficient.

  • IMF researchers found tariffs improve current accounts only when temporary; permanent or retaliatory tariffs leave imbalances largely unchanged.
  • Global current account imbalances are widening again, and the IMF warns such expansion has historically preceded financial crises.
  • Tariff escalation significantly lowers output across all regions despite failing to rebalance trade, suggesting disorderly adjustment ahead.
  • Limited Impact of tariffs on current account positions despite output losses across regions
  • Widening Global imbalances now increasing risk of financial crises and capital flow reversals
  • Permanent Tariff perception preventing behavioral shifts needed to rebalance trade positions

The International Monetary Fund has issued a stark assessment of global macroeconomic imbalance, directly challenging the efficacy of tariffs and industrial policy as tools for narrowing trade gaps.

In a new policy paper by IMF researchers Pierre-Olivier Gourinchas and Christian Mumssen, the Fund concludes that traditional tariff-based approaches yield limited and often counterproductive results, while current account imbalances, the difference between national savings and investment, continue to widen.

The analysis carries significant implications for institutional crypto investors, as structural economic strain and the failure of conventional policy remedies historically trigger capital reallocation toward alternative assets, including cryptocurrencies and blockchain-based financial infrastructure.

IMF Finds Tariffs Leave Trade Deficits Essentially Unchanged

The IMF’s research isolates a critical mechanism explaining tariff ineffectiveness: tariffs only improve current accounts in rare circumstances when they are perceived as temporary. Most real-world tariffs, however, are either signaled as permanent measures or trigger reciprocal tariffs from trading partners.

When market participants expect tariffs to persist, they do not adjust their underlying saving and consumption behavior, leaving the current account imbalance fundamentally unchanged.

The policy paper emphasizes that traditional macroeconomic policies, primarily fiscal adjustment, monetary policy, and structural reforms to productivity, remain the dominant levers for addressing current account imbalances. By contrast, narrow tariff regimes and selective industrial policies deliver minimal rebalancing while imposing measurable economic costs.

The IMF’s modeling shows that escalating tariffs significantly reduces output across all regions involved, meaning trade partners collectively lose economic growth without achieving the stated objective of narrowing deficits.

This creates a policy paradox: governments deploy tariffs expecting trade rebalancing, but the mechanism fails while real economic damage accumulates.

Widening Global Imbalances Signal Rising Risk of Disorderly Capital Flows

Beyond tariff ineffectiveness, the IMF flags a more immediate concern: current account imbalances are widening again after a period of relative stability. Historically, such widening episodes have preceded financial crises and abrupt reversals of capital flows, events that force rapid repricing of assets and sudden shifts in capital allocation across markets.

The Fund’s language underscores the severity: “disorderly adjustment” in the absence of coordinated policy could prove “exceptionally costly” to global financial stability.

The United States exemplifies the structural tension the IMF identifies. Large fiscal deficits combined with sustained consumer spending drive the US current account deficit, offsetting other regions’ surplus positions.

A continued weakening of America’s fiscal position without coordinated adjustment by surplus countries creates a bifurcated global economy where capital flows depend entirely on confidence in dollar-denominated assets and US debt servicing capacity.

If that confidence erodes, whether through fiscal deterioration, inflation pressures, or geopolitical risk, capital will seek alternative destinations and alternative stores of value.

The IMF’s own framework acknowledges that countries rarely coordinate such adjustments voluntarily, making unilateral capital reallocation the default outcome.

Dollar Pressure and Stablecoin Adoption Likely to Accelerate

The IMF’s analysis directly implies three crypto-relevant outcomes. First, sustained pressure on the US fiscal position creates long-term headwinds for dollar confidence, particularly if the government cannot credibly commit to deficit reduction. Bitcoin and other non-correlated hard assets historically gain institutional allocation during periods of currency debasement or fiscal stress.

Second, the persistence of trade tensions and macroeconomic imbalance creates demand for alternatives to traditional banking channels for cross-border settlement. USD-pegged stablecoins address this directly: they provide dollar exposure and purchasing power without direct dependency on the traditional banking system, central counterparty risk, or capital controls.

Third, the IMF’s warning of potential financial crises establishes a narrative environment where institutional investors justify allocation to uncorrelated assets.

Historically, such periods, including the 2008 financial crisis, the 2020 pandemic shock, and subsequent inflation crises, have seen inflows to Bitcoin and other cryptocurrencies as investors hedge tail risks and seek assets that perform independently of traditional financial system stress.

The IMF’s own framing of “exceptionally costly” disorderly adjustment primes institutional risk officers to consider cryptocurrency allocations as crisis insurance.

For stablecoin infrastructure specifically, the IMF’s analysis suggests that businesses engaging in cross-border trade will face increasing pressure to find alternatives to dollar-based wire transfers and correspondent banking. As trade tensions persist and imbalances widen, the cost and friction of traditional settlement mechanisms may tip the economic calculus toward blockchain-based settlement.

Stablecoins eliminate counterparty risk with the banking system while preserving dollar pricing, a direct response to the structural instability the IMF identifies.

Coordinated Adjustment Remains Elusive, Markets Will Move First

The IMF’s policy prescription calls for “synchronized adjustment”, where deficit and surplus countries move together to rebalance current accounts through coordinated fiscal and monetary policy. Such coordination would require agreement on burden-sharing, timing, and domestic political costs across multiple nations, each with competing interests and domestic constituencies.

Historical precedent suggests such coordination is exceptionally difficult to achieve. The 1980s Plaza Accord remains a rare example of successful currency coordination; most other attempts have failed or produced only partial, temporary results.

In the absence of coordinated action, market participants operate independently. Investors, corporate treasurers, and central banks will pursue their own rebalancing strategies: moving capital between currencies, adjusting portfolio allocations, and seeking higher-yielding or safer alternatives depending on their risk tolerance and macroeconomic outlook.

This decentralized adjustment process creates opportunities for alternative financial infrastructure, particularly blockchain-based systems that operate outside traditional policy coordination channels and offer settlement finality independent of government action.

The IMF’s implicit message: if governments cannot coordinate, markets will dislocate, and infrastructure designed for uncoordinated systems will benefit.

Institutional investors should monitor US fiscal trajectory and the timing of the next round of trade negotiations as leading indicators for capital flow stress. The IMF’s analysis does not specify a timeline for imbalance widening to trigger a crisis, but current account divergences tend to compress rapidly once confidence shifts. Watch specifically for: (1) shifts in central bank reserve composition away from dollar assets, (2) regulatory approvals for institutional stablecoin settlement rails in major markets, and (3) statements from the US Treasury or Federal Reserve acknowledging fiscal sustainability constraints, any of which would confirm the IMF’s warning is moving from academic concern to market reality.

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The Bank of England wants banks to have less exposure to crypto by 2026
AI News

The Bank of England wants banks to have less exposure to crypto by 2026

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The Bank of England plans to introduce new proposals on banks’ exposure to crypto assets by 2026 to safeguard financial stability.

During the Risk Live Europe event in London, David Bailey, an Executive Director of Prudential Policy at the Bank of England, stated that the UK aims to implement more stringent regulations.

Bailey indicated that banks will likely be encouraged to keep their crypto exposure low.

The UK takes precautions to address financial instability in crypto-related banks 

Many nations have been trying to address financial instability resulting from crypto volatility by examining how connected their banks are to cryptocurrency. This particularly follows the 2023 collapse of Silicon Valley Bank and Silvergate Bank, which had significant crypto-related clients.

Addressing the Bank of England’s upcoming proposals on crypto exposure, David Bailey said it can be prudent to begin with stricter regulations while gathering data to determine whether those rules could be eased over time.

He noted one example of this issue: how banks handled their investments in crypto assets, particularly ones with high price swings and where investors could lose everything.

It is worth noting that the UK is trying to enact the Basel Committee on Banking Supervision’s disclosure framework for banks’ exposure to crypto.

The committee said the framework should be in place by the beginning of 2026 to allow nations to assess risks. Additionally, the Basel Committee recommended that banks allow only 1% of their investments in cryptocurrencies like Bitcoin. 

Bailey stated that the UK would base its plans on the guidelines the Basel Committee had created.

Meanwhile, the UK’s prudential crypto regulations will come as the country’s other financial watchdog — the Financial Conduct Authority — will soon roll out a new regulation for crypto.

FCA lifts ban on retail investors’ access to ETNs 

The UK is changing its stance on crypto as the government looks to boost the economy and back the digital assets sector. 

In April, Britain released a draft of laws to regulate cryptocurrencies for the first time. This matched the United States’ strategy instead of following the European Union’s tailored rules for the industry. 

Earlier, Britain’s financial regulator revealed plans to lift a ban on consumers buying crypto Exchange Traded Notes (ETNs) but under certain legal conditions.

Notably, to be available to individual consumers, the ETNs must be traded on an investment exchange approved by the FCA, according to the regulator. 

This marks a shift from the regulator’s earlier position, which barred retail investors from accessing the financial product. While the Financial Conduct Authority (FCA) approved crypto ETNs for professional traders last year, it maintained a ban for retail investors, arguing that the products were “ill-suited” and posed significant risks of harm.

The FCA gave a reason for this sudden shift in policy. According to a regulatory body, allowing retail investors to buy ETNs would help economic growth and competitiveness.

David Geale, Executive Director for Payments and Digital Finance at the FCA, said the regulator is rethinking its approach to risk.

According to Geale, lifting the ban would let people decide if a high-risk investment suits them, even if it means they could lose all their money. He addressed this as they opened up room for feedback on the proposal.

Still, the watchdog noted that the ban on retail investors trading cryptoasset derivatives will remain. 

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