Stablecoins and (Non)Crypto Shocks: A 2026 Update

The market capitalization of U.S. dollar stablecoins has surged by $71 billion (30 percent) since our last update in April 2025, reaching approximately $308 billion. This growth coincided with the implementation of the GENIUS Act in July 2025, which introduced the first federal regulatory framework for payment stablecoins. The two biggest issuers, Tether (USDT) and USDC, control over 80 percent of the industry's assets.

However, USDC's reserve holdings are notably different from its counterpart. While USDC primarily holds cash and short-term U.S. government securities, USDT's reserves are more diversified, including corporate bonds, gold, Bitcoin, secured loans, and other investments.

Following the collapse of Silicon Valley Bank (SVB) in March 2023, Circle, the issuer of USDC, revealed that around 8 percent of USDC's reserves were deposited in SVB. Subsequently, USDC's price fell significantly below $1.00, and it experienced substantial net outflows. Moreover, the Circle Reserve Fund (CRF), which makes up around 86 percent of USDC's reserves, underwent a notable shift in its composition.

The weighted average maturity (WAM) of the CRF dropped below that of median Treasury-only money market funds (MMFs) following the SVB failure, indicating a reduction in interest-rate risk exposure. The CRF also increased its exposure to repurchase agreements (repos) from zero to over 90 percent of its net assets, significantly lowering its interest-rate risk exposure and changing its counterparty risk profile.