Even a mountain of T-bills won't save Tether and Circle from a sudden liquidity crisis, expert says

The structural composition of private stablecoins is facing heightened institutional scrutiny as regulators in European bloc countries clamp down on unauthorized digital assets, digital asset experts suggested Tuesday at the Digital Money Summit 2026 in London.

Christoph Hock, head of Tokenization and Digital Assets at Union Investment, one of Germany's largest institutional asset managers with nearly $620 billion in assets under management, highlighted that the reserve backing commonly used by Tether and Circle for their dollar-backed stablecoins behaves structurally more like a speculative fund than a true fiat peg.

"To be honest, a stablecoin, from my perspective, is not a stablecoin,” Hock said. “We discussed Tether, we discussed Circle’s $USDC, and when looking at the invested assets, for example, of Tether, they have massive holdings in gold, they have massive holdings in bitcoin.”

Hock, whose role is building out the asset managers' token-economy strategies, digital cash mechanisms, and fund tokenization frameworks. said that, for that reason, $USDT and $USDC look more like hedge funds and warned that these stablecoins’ tokenomics are vulnerable and can affect holders' financial interests.

“And then probably, as seen with $USDC, taxpayers' money is again needed to bail them out," he noted, while recalling Circle’s 13% de-pegging event and the “catastrophic risk it poses to institutional investors.”

In March 2024, $USDC dropped to $0.74 on three separate occasions following a marketwide sell-off. The depeg then was said to occur when a trader sells $USDC for $USDT, and there isn't sufficient liquidity to maintain the $1 peg. A year earlier, $USDC's normally stable price plunged 13% to 87 cents while Ethereum gas fees soared hours after the crypto-tied bank failed.

Hock also criticized Tether’s decision to allocate substantial funds to gold and bitcoin. He argued that these asset choices expose corporate treasuries to market volatility, shifting the risk from a stablecoin to that of a stealth hedge fund.

Tether’s gold reserves as of January 2026 are estimated at 148 tonnes, valued at roughly $23 billion, ranking among the top 30 global owners of the metal and surpassing several sovereign nations.

Hock insisted that for corporate treasury and asset managers who rely on stablecoins as a safe vehicle strictly for overnight cash settlement, a sudden 13% mark-to-market loss on cash positions is catastrophic. He added that institutional players absolutely cannot afford to take this level of risk and slammed stablecoins for undermining their foundational promise as fiat-pegged digital assets.