A recent report from KTrade Securities has raised alarms regarding stablecoins, digital tokens that are pegged to fiat currencies. The report equates the potential systemic risk posed by stablecoins to that of the shadow banking sector prior to the 2008 financial crisis. As of September 2025, stablecoins have surged in prominence, making up nearly 80% of cryptocurrency trading activity, with their total market capitalization nearing $300 billion.
Faran Khan, the author of the report, articulates significant concerns surrounding the vulnerabilities of stablecoins. He highlights the lack of legal ownership of reserves by holders, which renders them vulnerable in cases of issuer insolvency. This situation could lead to scenarios reminiscent of bank runs, where panic leads to mass withdrawals. Unlike traditional bank deposits that are insured by mechanisms such as the FDIC or backed by central banks, stablecoin holders find themselves reliant solely on the solvency and integrity of private issuers, devoid of any government protections.
The report provides a noteworthy example of the growing power of stablecoins, specifically referencing Tether. This entity has ascended to become the 18th-largest holder of U.S. Treasuries globally, surpassing the holdings of countries like South Korea. Tether’s total reserves of $162.6 billion are backed predominantly by $105.5 billion in U.S. Treasury Bills, which account for nearly 65% of its total reserves.
Additionally, the report examines the implications of stablecoins on the global financial landscape. It describes them as part of America’s strategic efforts to uphold the dollar’s dominance. The recent GENIUS Act has introduced regulatory clarity, mandating that stablecoins be backed by 100% reserves in safe, liquid assets, while also extending U.S. sanctions oversight to these digital tokens. However, this dynamic fosters a new financial dependency for developing nations, deepening their reliance on the U.S. dollar and potentially leading to capital flight and reduced domestic investment in emerging markets.
To address these challenges, the Bank of England is preparing to implement stringent ownership limits on stablecoins, capping individual holdings at between £10,000 and £20,000 and business holdings at £10 million. Governor Andrew Bailey has cautioned that unregulated stablecoins could facilitate money laundering and underscores the necessity for safeguards akin to those present in traditional banking.
Moreover, the report argues that the proliferation of stablecoins in developing economies undermines trust in local currencies and complicates monetary policy, simultaneously increasing the demand for dollars globally without formal U.S. banking measures.
KTrade’s report draws parallels to historical financial crises, such as the Latin American debt crisis and the Asian Financial Crisis, to illustrate how dollar dominance can destabilize emerging markets. It recommends that nations consider launching their own sovereign stablecoins, which would be backed by productive assets like energy infrastructure. This could empower local investors with high-yield options that circumvent traditional banking systems and foster economic growth through targeted credit allocations.
In summary, KTrade Securities advocates for a reevaluation of the current landscape of stablecoins, urging countries to take proactive measures to secure their financial sovereignty and mitigate risk in an increasingly interconnected world.
