Secretary Yellen: Stablecoins Pose Significant Risk to Financial Stability

The Treasury will issue a “comprehensive report” on cryptocurrencies and stablecoins “shortly,” Yellen said

article-image

BLOCKWORKS EXCLUSIVE ART BY AXEL RANGEL

share

key takeaways

  • Congress needs to pass stablecoin legislation before the end of the year, Yellen said
  • UST’s recent crash shows the market is vulnerable to runs, the Treasury Secretary warned

US Treasury Secretary Janet Yellen doubled down on her stance that stablecoins pose a threat to financial stability Tuesday during annual testimony before the Senate Banking Committee.

“I certainly think there are many risks associated with cryptocurrencies,” Yellen said in response to a question from Sen. Catherine Cortez Masto, D-Nev., about when stablecoin regulation might come. 

“The cryptocurrency market is now larger than the subprime mortgage market, which triggered a global financial crisis,” Cortez Masto said. 

The Treasury will issue a “comprehensive report” on cryptocurrencies and stablecoins “shortly,” Yellen said, as part of a request from the President’s Working Group on Financial Markets (PWG). She also stressed that Congress should be working on stablecoin legislation too, saying that it is “highly appropriate” this gets done by the end of 2022. 

“[With stablecoins,] we see run risks, which could threaten financial stability, risks associated with a payment system and its integrity and risks associated with increased concentration if stablecoins are issued by firms that already have substantial market power,” Yellen said. “We definitely see significant risks.” 

These risks are not hypothetical, they are playing out in real time, Yellen added. 

“A stablecoin known as TerraUSD experienced a run and declined in value,” Yellen said, referring to UST losing its US dollar peg and falling as low at $0.65 Monday. “I think that this simply illustrates that this is a rapidly growing product and there are rapidly growing risks.”

The aggregate value of stablecoins grew over the past year to more than $180 billion in March 2022, the Federal Reserve noted in its financial stability report, released Monday. The stablecoin sector is highly concentrated, the report added, with the three largest stablecoin issues (Tether, USD Coin, and Binance USD) making up more than 80 percent of the total market value. Terra USD previously was the third largest by market capitalization until Monday’s meltdown.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Flashnote Template (6).png

Research

Trading of the President's TRUMP memecoin sent the market capitalization to over $15B, resulting in all-time highs for Solana’s Real Economic Value, DEX volumes, and stablecoin supply. This event further validates Solana as the venue for high-throughput onchain activity, with Solana DEXs and DeFi applications as primary beneficiaries, while also signaling to further experimentation, utilization, and adoption of memecoins as legitimate financial instruments for speculation, crowdfunding, or capital formation. President Trump’s continued willingness to experiment in crypto reaffirms a highly-favorable political and regulatory climate for the industry.

article-image

Back in 2021, there were really only two memecoins and both hit enormous peaks along with BTC

article-image

Polygon Labs CEO Marc Boiron thinks that yield-bearing stablecoins could be the next big narrative

article-image

A Nova Labs exec referred to the last-day lawsuit “as irresponsible as it is wrong-headed”

article-image

Corresponding resolutions were introduced to “roll back the disastrous” rule requiring custodial brokers to report transactions

article-image

Donald Trump has slightly backed off from the ambitious tariff goals he touted on the campaign trail

article-image

Some have called it “a relief” that the task force will be led by the crypto-friendly Hester Peirce