You might think that if a stablecoin's reserves are entirely in short-term US Treasury bills, it should be safe enough—after all, they are "risk-free assets" with short maturities that can be turned into cash quickly.
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But the reality is: even if reserves are entirely in short-term Treasuries, stablecoins still face a bank run risk. The core issue is not whether Treasuries themselves are safe, but whether a large amount of them can be sold quickly and without loss in a stressed environment.
First, look at the facts: Treasury liquidity is different in normal times versus under stress
Many people treat short-term US Treasury bills as "cash equivalents," but this may not hold true under large-scale redemption pressure.
An analysis published in the American Bankers Association (ABA) journal points out that research on secondary market liquidity for short-term Treasury bills is actually scarce because these trades happen over the counter and are facilitated by brokers. Also, given the short maturity of these instruments, most investors choose to hold them until maturity.
In other words, in normal market conditions, converting short-term Treasuries into cash is indeed not difficult. But if a stablecoin issuer faces sudden, large-scale redemption requests, the situation could be completely different.
Research from the Bank for International Settlements (BIS) supports this logic: a fire sale of $30 billion in Treasuries can cause Treasury yields to fluctuate by 6.4 basis points. And such subtle fluctuations can create cumulative negative effects in the sensitive money market.
Why does "holding short-term Treasuries" not equal "being able to handle a bank run"?
The problem lies in three areas:
First: Maturity mismatch between assets and liabilities
A stablecoin's liabilities (the tokens held by users) are demand liabilities that can be redeemed at any time. But reserve assets, even if entirely in short-term Treasuries (for example, with remaining maturities of 93 days or less), are not "immediately due."
Second: Large-scale redemptions require concentrated selling
If users redeem in large numbers, and the issuer does not have enough cash and overnight reserves, it must sell short-term Treasuries to obtain US dollars. Large-scale selling pushes up Treasury yields, causing bonds to be sold at a discount—meaning the issuer has to absorb capital losses.
Third: Liquidity shocks can spread across assets
KuCoin's analysis points out: when US Treasuries in reserve assets are sold off in large amounts during outflows, it quickly breaks the supply-demand balance of short-term Treasuries, which in turn affects short-term interest rates and the liquidity of money market funds. This is not just a risk of one stablecoin losing its peg. The essence is that the selling of reserve assets itself constitutes a "cross-asset" transmission path in financial markets.
A real example: USDC depegging in 2023
In March 2023, USDC fell to $0.87. The reason was that Circle had $3.3 billion in reserves frozen at Silicon Valley Bank.
Why did USDC still have problems even though it held short-term Treasuries? Because even if most of the reserves are in Treasuries, if the cash portion held in bank accounts gets frozen due to a bank failure, the issuer cannot immediately honor redemptions.
Where is the real risk?
Christoph Hock, head of tokenization at Union Investment, a major European asset management company, made a sharp point at the 2026 Digital Currency Summit: "Stablecoins are not stablecoins. When you look at Tether's reserve assets, you will find they hold a lot of gold and also a lot of Bitcoin—this makes the structure of stablecoins more like hedge funds rather than true fiat-pegged instruments."
This means that even if short-term Treasuries make up the majority of reserves, if a portion of assets is allocated to gold, Bitcoin, or other volatile assets, selling those assets under redemption pressure could result in even greater price losses.
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What should you do?
To assess the reserve structure and liquidity risk of the stablecoin you hold, you can refer to the following steps:
- Visit the issuer's transparency page and check the latest reserve report.
- Focus on two key data points: what percentage of reserves is in cash and overnight reserves (these can be used directly for redemptions without selling bonds); and the maturity distribution of short-term Treasuries (the shorter, the better).
- If a small portion of reserves is in non-traditional assets like gold or Bitcoin, you need to judge whether you can accept the volatility risk transmission from these assets.
Completion standard: You can clearly understand how much of the stablecoin's reserve composition is immediately available cash/overnight assets, and how much needs to be converted by selling short-term Treasuries.
Verification method: Check the "cash and overnight reserves" percentage in the latest reserve report on Tether's or Circle's official transparency page. If this percentage is very low (for example, below 10%-15% of reserves), and most reserves are in Treasuries, it means that during concentrated redemptions, a large amount of bonds would need to be sold, potentially facing liquidity pressure and discount risk.
Follow-up suggestion: If you are concerned about liquidity risk in stablecoins, consider diversifying the types of stablecoins you hold and do not put all your funds with a single issuer. Also understand whether the platform you use supports quickly converting stablecoins to fiat or other assets in an emergency, and confirm in advance that your withdrawal channels are working smoothly.
