TLDR:

• A fully collateralized stablecoin can still depeg if its reserves cannot be accessed during a run.
  
• The BIS compares stablecoins to Eurodollars, noting they lack central bank settlement and repo facilities.
  
• Stablecoins mirror 19th-century wildcat banks, operating across fragmented jurisdictions with no shared backstop.
  
• Emerging stablecoin regulations follow the same path that brought lasting stability to traditional banking systems. 

Stablecoins face a structural vulnerability that full collateralization alone cannot resolve. The Bank for International Settlements raised this concern in a recent paper titled “On Par: A Money View of Stablecoins.”

Crypto research firm Delphi Digital shared the findings on social media, noting reserves mean little without proper access mechanisms.

The analysis draws parallels between stablecoins and historical banking failures. It compares them to both Eurodollars and 19th-century wildcat banks, pointing to regulation as the path forward.

The Collateral Problem Stablecoins Cannot Escape

A stablecoin can hold enough reserves to cover every dollar in circulation and still depeg. The critical question is whether those reserves can be accessed when market pressure demands it.

Without that access, even fully backed stablecoins remain vulnerable to sudden redemption runs. Collateral ratios alone do not guarantee stability during a crisis.

The BIS paper compares stablecoins directly to Eurodollars — private dollar deposits held offshore outside U.S. regulatory reach. Traditional banking maintains par value through central bank settlement and primary dealer networks.

Standing repo facilities and a lender of last resort further stabilize the system under stress. Stablecoins currently have none of these tools available.

Delphi Digital stated on X that “if there’s a run, there’s no forward market, no credit facility, and no mechanism to absorb the pressure before it hits the reserves directly.”

That absence of institutional backstops creates a fragility that reserve ratios cannot address. The gap between holding reserves and deploying them quickly remains a central, unresolved problem.

This vulnerability becomes most visible during periods of sharp market stress. When redemption demand spikes, issuers must liquidate reserves quickly and under pressure.

Without any institutional buffer, that process can accelerate a depeg rather than prevent it. The result is a feedback loop that turns a manageable outflow into a broader crisis.

Wildcat Banking and the Road to Stablecoin Regulatory Stability

The BIS paper extends its comparison beyond Eurodollars, likening stablecoins to the wildcat banks of 19th-century America.

Those institutions operated across fragmented jurisdictions without uniform oversight or shared infrastructure. The parallel to today’s stablecoin market is direct and observable.

Delphi Digital noted that wildcat banking, despite its early instability, eventually gave way to federal oversight and consolidation.

That regulatory evolution made the traditional banking system functional at the national scale over time. The trajectory for stablecoins appears to follow the same historical pattern.

The current fragmentation across different blockchains and jurisdictions mirrors that earlier era of banking. Multiple issuers operate under differing rules, with no shared settlement layer or system-wide backstop in place. That inconsistency makes achieving broader, durable stability difficult without coordinated oversight.

Regulatory frameworks now taking shape across major markets aim to address these structural gaps directly. Legislation in the U.S., Europe, and Asia is beginning to impose reserve standards and licensing requirements on stablecoin issuers.

These measures closely echo the same principles that brought lasting stability to traditional banking over the past century.