Nobel laureate warns stablecoins could trigger massive government bailout

Nobel laureate in economics Jean Tirole has warned that a loss of confidence in stablecoins could lead to large-scale redemptions, potentially necessitating a massive government bailout. In an interview with the Financial Times, he said that retail investors often treat stablecoins as perfectly safe deposits, meaning the government would face strong political pressure to intervene in the market if losses occur. Tirole identified the composition of reserves as the biggest concern. He noted that while U.S. Treasurys are popular, their yields often turn negative when accounting for inflation, pushing issuers to seek higher returns through riskier assets. He added that while market supervision could mitigate this risk, current regulations are insufficient due to political and financial conflicts of interest within the U.S. political establishment regarding cryptocurrency.