Professor Richard Portes: “Stablecoin boom is dangerous”
Richard Portes: “Central banks worried about possibility of a run on a stablecoin”
In a recent appearance on Bloomberg Business Surveillance with Tom Keene and Paul Sweeney, London Business School's Professor Richard Portes, CBE, warned that the explosive growth of stablecoins poses risks eerily reminiscent of past financial crises.
Portes, who serves on the European Systemic Risk Board (ESRB), and who recently co-chaired a landmark European study on stablecoins and systemic risk, was discussing the findings from this major European report on crypto-asset stability. The report, co-authored by Portes, highlights how the rapid expansion of crypto markets, and particularly stablecoins, could undermine financial stability if left unchecked.
“We first have to try to stop the stablecoin boom,” Portes said. “These are like money market funds in some ways, and we’ve seen runs on those before. Central banks had to step in then, and they’re worried they might have to again.”
Stablecoins, which peg their value to fiat currencies such as the US dollar, often hold reserves that are not fully liquid, ranging from bank deposits and Treasuries to money market funds. “You can’t cash those in overnight,” Portes noted, “and if there’s a run, there’s a problem.”
While Europe’s Markets in Crypto-Assets Regulation (MiCA) came into force in 2024, Portes argued that further regulatory review is essential. The ESRB report calls for stronger oversight focused on financial stability, not just investor protection. Similar debates are ongoing in the US, where legislative progress has stalled amid political gridlock.
Portes also highlighted the profit-driven structure of the stablecoin market:
“It’s a terrific business model. You take people’s money, give them a stablecoin that pays no interest, and invest the reserves in Treasuries. The yield is pure profit. It’s low overhead, and high risk.”
As retail investment vehicles like crypto ETFs draw digital assets further into the mainstream, Portes’ warnings resonate with growing urgency. His work continues LBS’s tradition of thought leadership on global financial systems and the evolving risks shaping modern markets.