Nobel Laureate Jean Tirole warns of alarming hidden risks in stablecoins

Hidden stablecoin risk is moving to the forefront of global financial debates after Nobel Prize-winning economist Jean Tirole warned that treating stablecoins as “perfectly safe assets” could mask deep systemic vulnerabilities. His remarks raise alarms that unchecked growth in stablecoin markets could set the stage for multibillion-dollar bailouts if confidence collapses.

In an interview with the Financial Times, Tirole argued that governments may have no choice but to rescue retail and institutional holders if stablecoins lose their peg to sovereign currencies.

“If it is held by retail or institutional depositors who thought it was a perfectly safe deposit, then the government will be under a lot of pressure to rescue the depositors so they don’t lose their money,” said Jean Tirole, professor at the Toulouse School of Economics.

Hidden stablecoin risk and government bailouts

Tirole’s hidden stablecoin risk warning echoes concerns raised by regulators worldwide. Stablecoins are typically backed by fiat-denominated assets such as U.S. Treasuries and cash reserves.

However, these assets often deliver low returns, sometimes even negative yields after inflation.

“People forget that U.S. government bonds have had periods of negative returns,” Tirole noted. “If the yields remain unattractive, stablecoins themselves could quickly lose investor appeal.”

This low-yield environment, he argued, creates pressure for issuers to chase higher returns by investing in riskier assets—precisely the kind of move that could trigger a loss of reserves, a depeg, and a classic bank-style run.

Stablecoins enter regulatory spotlight

The rise of hidden stablecoin risk comes at a time when governments are scrambling to implement new regulations.

In the U.S., the proposed Genius Act aims to tighten oversight of digital tokens, while Hong Kong has already introduced a Stablecoin Ordinance requiring issuers to be licensed.

According to market research, stablecoins are expected to surpass $400 billion by the end of 2025, with projections reaching $2 trillion by 2028. As adoption accelerates, the stakes of ignoring hidden stablecoin risk grow ever higher.

Why Tirole is “very, very worried”

Jean Tirole emphasized that his greatest concern lies in the supervision of reserve assets.

If investors begin to doubt whether stablecoin issuers actually hold the reserves they claim, panic could spread quickly.

“I am very, very worried about the lack of supervision,” Tirole warned. “If depositors run, and if assets are not there, the price of stablecoins might go down and lose their peg entirely.”

This scenario would not only impact crypto traders but also force governments into politically sensitive bailouts—something taxpayers may be unwilling to tolerate.

Political interest and the hidden stablecoin risk

Tirole added another layer to the hidden stablecoin risk debate by highlighting political conflicts of interest.

He suggested that some U.S. policymakers have personal stakes in crypto, which may cloud their judgment in regulating the industry.

“Some key members of the U.S. administration have a personal financial interest in cryptocurrency. And beyond the personal interest, there’s ideology,” Tirole said, in what appeared to be a reference to the Trump family’s crypto-linked ventures.

Economists argue that ignoring hidden stablecoin risk could echo mistakes from the 2008 financial crisis, when regulators underestimated systemic vulnerabilities in mortgage-backed securities.

“History shows us that shadow banking products can look stable until the moment they collapse,” said Eswar Prasad, a Cornell University professor and former IMF official, speaking in support of tighter oversight.

Regulating away the risk?

Despite the alarm, experts believe proper regulation could contain the hidden stablecoin risk.

Central banks and financial watchdogs are working on frameworks to ensure stablecoin reserves are transparent, liquid, and subject to the same scrutiny as traditional banking assets.

Still, Tirole remains skeptical: “Unless governments are willing to separate ideology from policy, the regulatory gaps will remain, and the risks will accumulate.”

The message is clear: hidden stablecoin risk is real, and it’s growing. With stablecoins poised to play an even bigger role in global finance.

Nobel laureate Jean Tirole’s warning serves as a timely reminder that what looks stable on the surface may, in fact, be hiding systemic fragility.