A senior executive at one of Germany's largest asset managers has drawn a line between the two biggest dollar-pegged tokens and the stablecoin label, arguing that neither Tether's USDT nor Circle's USDC meet the definition of a stable asset.
The case against the stablecoin label
Speaking in a professional capacity, the head of digital assets and tokenization at the firm said that, from his perspective, USDT and USDC are not stablecoins. He did not elaborate on the specific criteria he uses, but his comment challenges the industry's standard description of the two tokens, which together command a market capitalization of well over $100 billion.
The executive's view aligns with a minority but vocal set of critics who argue that stablecoins backed by commercial paper, corporate bonds, or even short-term Treasuries carry risks that a pure fiat-backed or fully collateralized reserve would not. Tether and Circle both publish regular attestations showing that a majority of their reserves are held in U.S. Treasury bills, but the German asset manager's digital assets chief suggested that reliance on any form of debt — even sovereign debt — creates a vulnerability.
The liquidity risk that Treasuries can't fix
The same executive warned that even a large amount of U.S. Treasury bills cannot prevent a sudden liquidity crisis for Tether and Circle. His reasoning appears to center on the speed and scale of a potential run. In a panic scenario, holders of USDT or USDC could attempt to redeem billions of dollars within hours. Treasuries, while highly liquid, still take time to sell in size, and the market for them is not immune to sudden dislocations — especially if many large holders try to exit at once.
This is not a hypothetical concern. During the collapse of the Terra ecosystem in May 2022, Tether briefly traded at $0.95 on secondary markets as redemptions surged. The company processed billions in withdrawals and later said it met all requests, but the episode showed how quickly confidence can crack. Circle faced a similar test in March 2023 when USDC de-pegged after Silicon Valley Bank failed, because Circle held $3.3 billion in reserves at the bank. The token recovered after the U.S. government guaranteed all deposits, but the incident exposed the fragility of stablecoin reserves parked at a single institution.
The executive's point is that no amount of Treasury bills can guarantee an instant 1:1 redemption if every user demanded their money back simultaneously. The mechanics of settling T-bill sales take at least one business day, and in a stressed market, even that timeline could stretch.
What this means for the broader market
The remarks from the German asset manager add to a growing pile of skepticism about stablecoin safety from institutional investors. Many large asset managers and pension funds remain on the sidelines, unwilling to hold digital assets that rely on opaque or time-sensitive reserve structures. The executive's public doubt could reinforce that caution, particularly among European institutions that already face stricter regulatory expectations under MiCA.
Tether and Circle have both taken steps to improve transparency. Tether now publishes a quarterly assurance report from an accounting firm, and Circle has long provided a monthly breakdown of its reserves. But neither company has submitted to a full audit by a Big Four firm — a step that critics say is necessary to truly prove solvency.
The debate over what qualifies as a stablecoin is not just semantic. Regulators in the European Union, the United Kingdom, and the United States are all crafting rules that could define stablecoins narrowly, potentially excluding tokens backed by anything other than cash or cash equivalents. If the definition used in the German executive's firm gains traction, USDT and USDC could face compliance hurdles in key jurisdictions.
For now, both tokens continue to trade near their $1 pegs, and no liquidity crisis is imminent. But the words of a senior figure at a major asset manager carry weight, and they serve as a reminder that the stablecoin industry has not fully answered the question its name implies.
