Stablecoin reserves backed by short-dated US government paper might look bulletproof on a balance sheet. But one German asset manager isn’t convinced. The head of digital assets and tokenization at a major German firm told CoinDesk that, from his perspective, USDT and USDC do not qualify as stablecoins. More troubling, he argued that even a mountain of Treasury bills cannot shield either token from a sudden liquidity crisis, according to the original report.
The manager, who leads digital asset strategy at one of Germany’s largest asset managers, stopped short of naming the mechanism that would turn T-bills into a liability during a panic. But his remarks land at a moment when the market structure around tokenized Treasuries is expanding rapidly. On-chain real-world assets have already crossed $20 billion, with major institutions settling tokenized Treasury trades live. That growth makes the liquidity question anything but hypothetical.
A Definitional Fight
The label “stablecoin” has always been loose. USDT and USDC hold dollar-equivalent assets in reserve, mostly cash, T-bills, and other highly liquid instruments. That structure works in calm markets. The German manager’s point is that stability cannot be assumed simply because reserves are government-backed. In a scramble for redemptions, the very assets meant to guarantee stability could become hard to offload at par if dealers pull back or if broader money-market stress freezes short-term paper.
This is not the first time an institutional voice has questioned whether large fiat-backed tokens deserve the stablecoin name. Regulators and central bankers have long warned that no private digital token can be truly stable; only a central bank liability carries that guarantee. The German executive’s framing, however, directs the concern at the liquidity mismatch: daily redeemable tokens backed by securities that can still gap if too many holders head for the exit at once.
Why T-Bills Alone Aren’t Enough
T-bills are the world’s most liquid financial instrument — until they aren’t. During March 2020, even on-the-run US government securities briefly saw liquidity vanish as dealers stepped away. For a stablecoin issuer facing a run, the need to sell T-bills at scale in a thin market could crush the token’s peg, no matter how pristine the collateral. What the German manager described was not a credit problem but a market structure problem. A run doesn’t have to be rational to be fatal; it just needs enough redemptions to force sales into a market that has stopped absorbing paper at par.
Tether and Circle have both published attestations showing high-quality reserves. But the expert’s commentary underscores that reserve composition is only half the story. Access to deep, stable bid-side liquidity across fiat on-ramps and off-ramps determines whether a stablecoin can survive a fast redemption wave. That access depends on banking partners, payment rails, and the willingness of market makers to warehouse risk during a crisis.
The Regulatory Backdrop
The remarks come as Washington continues to wrestle with stablecoin legislation. A landmark crypto bill that would establish federal oversight for payment stablecoins is facing fierce bank lobbying days before a Senate vote. If passed, the law would demand strict liquidity and redemption requirements — rules that could reshape how USDT and USDC operate in US markets. The German manager’s warning aligns with the bill’s underlying premise: that a purely market-based stability promise is fragile absent mandatory shock-absorbing mechanisms.
Uncertainty about the bill’s final shape leaves stablecoin issuers in a regulatory limbo. Tether and Circle have both expanded their Treasury holdings dramatically over the past two years, partly in anticipation of new rules. Yet the expert’s commentary suggests that compliance may not be the same as safety. No amount of T-bills, he implied, can replicate the lender-of-last-resort backstop that central-bank money supplies.
For traders and DeFi protocols that rely on USDT and USDC as default dollar on-chain, the warning is a reminder to watch liquidity conditions, not just reserve composition. A stablecoin’s real health is measured by how quickly redemptions are met during a stress event — something that may not be testable until it’s too late. As on-chain real-world assets keep growing, the interplay between tokenized Treasuries, stablecoin collateral, and dealer balance sheets will remain one of the market’s most underappreciated risk channels.
