The financial system is becoming far more exposed to stablecoins than previously thought, the OECD club of wealthier nations warned in a report earlier this month. “The exposure of financial institutions to crypto assets generally remains limited but interconnections are increasing, raising new financial stability issues and regulatory challenges,” the report said.

Stablecoins have surged in volume in recent years, now with over $300bn in outstanding supply, roughly a tenth of the wider crypto market, according to CoinGecko. Geoff Kendrick, a digital assets analyst at the bank Standard Chartered, expects that figure to reach $2tn by the end of 2028, a scale that would put stablecoins alongside mid-sized sovereign bond markets.

“If stablecoins in the US increase at the same pace as they have been increasing [...] they will become systemically relevant at a certain point,” Dutch central bank governor Olaf Sleijpen said in an interview with the Financial Times.

To get an idea of their scale, dollar-pegged coins processed about $29tn of transactions in the first eleven months of 2025, 82 percent more than in the same period last year, according to data from Artemis Analytics. That’s more than twice Visa’s roughly $15tn over the same window and far ahead of PayPal and remittance services together at around $2tn. Stablecoins first pulled ahead of Visa in Mar 2024 amid the broader surge in the crypto market ahead of Bitcoin’s halving event in Apr.

Chart of stablecoins vs other payment systems. Source: Artemis Analytics.

Note: Chart does not include Mastercard data.

The 2 Dec report by the OECD (Organisation for Economic Co-operation and Development) notes that stablecoin issuers are now major holders of US Treasury bills. By the second quarter of this year, their reserves in bills placed them among the largest holders globally, ahead of countries such as Japan, Ireland, and Luxembourg.

Chart of the largest holders of T-bills. Source: OECD

Recent coverage has pointed out that central banks, regulators, and the press alike are beginning to stress the potential risks posed by such a sizeable source of liquidity that remains virtually unregulated.

Now, the OECD warns that, because of their scale and resulting global influence, stablecoins “could potentially affect the pricing and operation of segments of critical funding markets, such as sovereign debt ones.”

Similarly, on 3 Dec, the IMF warned that a cyber incident or sudden loss of confidence in issuers’ reserves would force issuers to sell T-bills and unwind their short-term repo market positions to meet redemptions. (The repo market is essentially a short-term lending market where firms quickly borrow cash by using safe assets such as government bonds as collateral.) In such an event, it becomes obvious how the rapid expansion of stablecoins (and lagging regulatory frameworks) could create a serious risk of shockwaves spreading across the wider financial system.

The OECD further warned of “liquidity shortages and fire sales of collateral, volatility in funding costs and markets, and spillovers to bank-based financial intermediation,” as well as potential strains on repo market liquidity when conditions are already tight.

Firms with crypto-related business models, including stablecoin issuers, hold substantial balances at commercial banks, in some cases because regulation requires it. This, the report warns, “could prove an unstable deposit base if stablecoin issuers suddenly withdraw funds to meet liquidity needs, potentially disrupting bank credit availability.”

An increasing share of stablecoin transactions now takes place in emerging markets in Asia, Latin America, and Africa, where stablecoins act as everyday “working dollars” in economies with high inflation, capital controls, or weak banking systems. The OECD warns that “exchange rate volatility in emerging-market economies could rise if capital controls are less effective at times of stress” and that foreign-currency stablecoins may “weaken the control of monetary conditions by domestic central banks.”

Geographically, stablecoin activity has become more spread out over time. Five years ago, Asia and North America together dominated most flows. As of late 2025, however, the picture is far more balanced: roughly 37% of onchain stablecoin transaction volume is in Europe, 33% in North America, 19% in Asia, 7.7% in Southeast Asia, 1.8% in Latin America, 0.7% in Oceania, and 0.2% in Africa, according to Artemis data. Meanwhile, nominal volumes in emerging markets have risen steeply.

Chart of historical regional shares of stablecoin transactions. Source: Artemis Analytics

“Many countries have begun to develop tailored regulations […] however, regulatory approaches differ across countries and significant gaps and inconsistencies remain.” The report adds that recent US and EU measures, together with new crypto-asset products, are “likely to further promote the integration of crypto-assets into the portfolios of financial intermediaries […] and thereby enhance linkages with traditional finance.”

At this rate, it becomes painstakingly clear that unless policymakers quickly close these regulatory gaps and coordinate across borders, the next bout of market stress could see this parallel dollar system transmit shocks into sovereign debt markets, bank funding, and fragile emerging-market currencies faster than regulators and central banks can contain them.