Wall Street Questions Whether Tether and USDC Are Really ‘Stable’ at All

Table of Contents The stablecoin landscape is dominated by two players: Tether and Circle’s USD Coin. Combined, these entities represent nearly 90% of the entire stablecoin circulation globally. However, an increasing chorus of financial professionals and regulatory bodies is questioning whether these digital assets are genuinely as secure as advertised. During the Digital Money Summit 2026 held in London, Christoph Hock — who leads Tokenization and Digital Assets at Union Investment, a German asset management powerhouse overseeing approximately $620 billion — issued a provocative statement: neither Tether nor USDC qualifies as an authentic stablecoin. Hock’s argument centers on the underlying collateral structure. Tether maintains substantial positions in precious metals and cryptocurrency in addition to government securities. By January 2026, Tether’s gold reserves reached approximately 148 tonnes, valued at around $23 billion, ranking it among the world’s top 30 institutional gold holders. According to Hock, this asset allocation resembles a speculative investment vehicle rather than a reliable cash substitute. “When looking at the invested assets of Tether, they have massive holdings in gold, they have massive holdings in bitcoin,” he said. USDC has already demonstrated these vulnerabilities in practice. Following the failure of a cryptocurrency-focused banking institution in early 2023, USDC’s value plummeted to $0.87. Additional instability occurred in March 2024, when the token dropped to $0.74 on three distinct occasions amid broader market volatility. Hock emphasized that such price swings are unacceptable for institutional market participants who depend on stablecoins for routine cash settlement operations. A double-digit percentage loss on what should function as a cash-equivalent position creates unacceptable risks for corporate treasury departments. He further highlighted the potential for government intervention, citing historical precedents and warning that USDC’s structural design could expose taxpayers to significant liability during severe market stress. Additional concerns emerged from the Bank for International Settlements. The BIS highlighted that Tether ranked as the seventh-largest acquirer of United States Treasury securities in 2024, accumulating $33.1 billion in net purchases throughout the year. Yet the institution cautioned that holding high-quality assets doesn’t address the fundamental challenge: conversion velocity. In the event of a mass exodus, even a reserve portfolio consisting primarily of Treasury bills might not convert to cash quickly enough to satisfy redemption demands. Conventional money market funds incorporate safeguards specifically for such circumstances — including liquidity charges and withdrawal restrictions. Most stablecoin issuers currently operate without comparable regulatory requirements in the majority of jurisdictions. Both the European Central Bank and the Federal Reserve have identified systemic vulnerabilities. The Fed has additionally observed that if consumers migrate savings from traditional bank deposits into stablecoins, financial institutions lose essential funding streams, introducing novel risks throughout the banking system. Given that two corporations command nearly the entire stablecoin marketplace, American and European regulators are now advocating for banking-equivalent supervision of stablecoin issuers, encompassing reserve requirements, audit protocols, and potential redemption mechanisms. Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.