Economist Jean Tirole Warns: Stablecoins Could Trigger Massive Bailouts

Stablecoins aren't just digital dollars—they're systemic risks waiting to blow a hole in public finances.

Nobel laureate Jean Tirole sounds the alarm: these crypto-pegged assets could force taxpayers to fund another round of costly rescues.

Why the panic? Unlike traditional banks, stablecoin issuers operate in regulatory gray zones—hoarding assets that might not be as liquid or secure as advertised.

When (not if) a run happens, governments face a brutal choice: let millions lose their savings or step in with a bailout that makes 2008 look tame.

Tirole’s warning cuts through the crypto-hype, reminding us that innovation without oversight is just disaster with extra steps—and the bill always lands on Main Street.

Another 'too big to fail' crisis? In finance, we really do love repeating history—especially when it’s expensive.

Chasing Higher Yields Is a Serious Risk

Tirole emphasized that the current model of backing stablecoins with U.S. government bonds could lose appeal due to historically low yields. This, he warned, may push issuers to “invest in different assets that carry higher returns and are riskier.”

“If it is held by retail or institutional depositors who thought it was a perfectly SAFE deposit,” Tirole noted, “then the government will be under a lot of pressure to rescue the depositors so they don’t lose their money.”

He further added that such risks WOULD be exacerbated if stablecoin issuers compromised on asset quality to boost returns. This would increase the likelihood of the coins losing their peg during market stress.

Tirole also flagged potential conflicts of interest within the U.S. administration, saying, “Some key members of the [US] administration… have a personal financial interest in [cryptocurrency]. And beyond the personal interest, there’s ideology.”

A Call for Robust Oversight

To prevent a systemic collapse, Tirole urged global regulators to boost capacity and take a more cautious stance on digital asset supervision. But he remained skeptical, “Such risks could be managed if global supervisors had sufficient manpower and were incentivized to be very careful. 

Tilore’s warning serves as a reminder that, in the absence of robust regulations, digital innovation may come at a high cost to taxpayers. 

Also Read: AAVE Labs Launches Horizon Platform for RWA-Backed Stablecoins