Stablecoins May Spark Costly Bailouts, Warns Economist Jean Tirole

Nobel prize-winning economist Jean Tirole has raised alarms about the potential for stablecoins to trigger large-scale government bailouts if investor confidence in their reserve backing falters during a financial crisis. His warnings come as the adoption of these digital tokens, pegged to fiat currencies, continues to grow rapidly, with the global stablecoin market now valued at approximately $295 billion.

Tirole highlighted the risks of stablecoin issuers chasing higher yields by investing in riskier assets, which could undermine the perception of safety. "If it is held by retail or institutional depositors who thought it was a perfectly SAFE deposit," he noted, "then the government will be under a lot of pressure to rescue the depositors so they don’t lose their money."

The economist's concerns are particularly timely as U.S. legislation paves the way for banks to issue their own stablecoins, potentially accelerating adoption while amplifying systemic risks.