TL;DR
- Moody’s warned about the fragility of the stablecoin market, valued at $300 billion, which has experienced temporary depegs in USDT and USDC.
- The agency noted that stablecoins function as credit instruments; they depend on the quality of reserves, the issuer’s governance, and the ability to meet redemptions.
- The sector operates outside traditional regulatory frameworks, relying on third parties and lacking prudential capital and stress testing.
Moody’s warned about the risks in the stablecoin market, currently valued at $300 billion. The agency identified temporary depegs in fiat-backed coins such as USDT and USDC, which affected their value under market pressure. In 2022, the collapse of FTX caused a liquidity shock that impacted USDT. In 2023, USDC fell below $1 after its exposure to Silicon Valley Bank during the U.S. banking crisis became known.
Moody’s: Stablecoins Function as Credit Instruments
Moody’s report indicates that stablecoins operate as credit instruments. Their safety depends on the quality of reserves, the issuer’s governance, and the ability to meet full redemptions. The agency warned that poor reserve management or weak oversight can trigger systemic stress in both the crypto and traditional markets.
Stablecoin issuers operate outside traditional regulatory frameworks. They lack prudential capital requirements, stress testing, and uniform reporting standards. Many rely on third parties such as custodians, reserve managers, and technology providers, which increases operational risks.
The wave of new regulations aims to address these issues. The MiCA law in Europe and the GENIUS Act in the U.S. require stricter disclosures and segregated reserves. The Financial Conduct Authority and the Bank of England will directly supervise issuers. Despite this, Moody’s warns that many non-bank projects lack sufficient governance to withstand systemic shocks.
A Market Processing Over $9 Trillion in Annual Settlements
The stablecoin market continues to grow. By the end of 2025, its capitalization exceeded $300 billion, and the annual settlement volume reached $9 trillion. Nineteen new coins were launched for cross-border payments and DeFi operations. Moody’s describes the industry as a programmable settlement layer, linking blockchain-based money directly to the traditional financial system.
The firm emphasized that weak reserves, opaque audits, or governance failures could have severe repercussions in both crypto and traditional markets. The sector’s expansion increases systemic importance and exposes users to potential losses from operational and liquidity issues.
Moody’s concludes that despite exponential growth and widespread adoption, the perceived stability of stablecoins does not always match their underlying structure. The market requires supervision, strong governance standards, and solid reserve management to prevent disproportionate impacts across the financial industry
