The Bank of Mexico (Banxico), the country’s central bank, has cautioned that stablecoins could threaten financial stability if their growth continues without coordinated international regulation. In its new financial stability report, Banxico highlighted vulnerabilities tied to stablecoins’ reliance on short-term U.S. Treasury assets, market concentration and divergent regulatory frameworks abroad.
The report — released as part of the bank’s annual exploration of systemic risks — underscores Mexico’s cautious stance toward digital assets, even as other nations advance stablecoin frameworks. Banxico said it will keep a “healthy distance” between its traditional financial system and cryptocurrencies in the absence of a unified global framework.
Core concerns: liquidity, concentration and regulatory gaps
According to Banxico’s findings, stablecoins present several key risks:
- Heavy dependence on short-term U.S. Treasuries — Stablecoin issuers have increasingly backed their tokens with short-term U.S. government debt, a dynamic that ties their liquidity profiles closely to another critical segment of global markets. This reliance could amplify stress if market conditions deteriorate unexpectedly.
- Market concentration — A small number of stablecoin issuers control a large share of the market (with two major issuers accounting for roughly 86 % of supply), leaving the ecosystem vulnerable to stress or disruption at a few key firms.
- Regulatory fragmentation — Banxico noted that differing global rules — such as Europe’s Markets in Crypto-Assets (MiCA) framework and proposed U.S. legislation like the GENIUS Act — could create arbitrage opportunities and magnify stress across jurisdictions due to inconsistent reserve, redemption and depositor-protection requirements.
Without coordinated international regulation, the report warns, mass redemptions or a stablecoin issuer’s failure could “spill into broader funding markets,” raising concerns that shocks in the digital-asset sphere could ripple into traditional finance.
Stablecoins’ benefits acknowledged but risks prioritized
While Banxico’s report clearly flagged downside risks, it also acknowledged that stablecoins could provide benefits — such as more efficient settlement mechanisms, lower transaction costs and improved liquidity in decentralized finance. However, the bank’s analysis stressed that those advantages do not offset the systemic vulnerabilities unless regulatory safeguards are harmonized globally.
Banxico’s message reflects a broader theme among global regulators grappling with how to oversee stablecoins: while most jurisdictions recognize digital assets’ potential, many also see unchecked expansion without unified rules as a catalyst for financial instability.
Mexico’s policy stance contrasted with global trends
Despite the growing interest in stablecoin regulation elsewhere — including frameworks being advanced in the European Union and the United States — the Bank of Mexico has taken a relatively conservative approach. Mexico’s current financial ecosystem remains cautious, and the central bank reiterated that it does not intend to hasten digital-asset integration without international consistency and robust safeguards.
Crypto adoption in Mexico also remains lower compared with other Latin American countries, a fact Banxico noted alongside its concerns about stablecoin-related risks.
What to watch next
- Global regulatory coordination — Whether international bodies and major economies can harmonize stablecoin oversight to reduce arbitrage and systemic stress risks.
- Stablecoin market dynamics — How concentration and reserve strategies among issuers evolve in response to regulatory pressure or market stress.
- Central bank reactions — Whether other regional authorities adopt similarly cautious stances or pursue more integrated approaches to stablecoin regulation.
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