Congestion Risks Hitting Stablecoin Stability: Fed Study Reveals Blockchain 'Bank Run' Threat
The GENIUS Act aims to create a safer environment for payment stablecoins by requiring issuers to maintain reserves at least one-to-one in liquid assets. However, a recent Federal Reserve staff paper models how transaction congestion can destabilize even a perfectly backed digital dollar.
The study uses an unbalanced weekly panel of five stablecoins from November 2017 through December 2025 and finds that when network effects are weak, high fees can reduce the usefulness of a token. This can lead to coordinated redemptions, where holders redeem their tokens before others do.
The paper presents a latent mechanism, not a forecast of a current run, but sharpens an unresolved question as Treasury implements GENIUS: the law gives regulators broad tools for policing issuers and reserves, while its explicit reserve provisions set no price or capacity standard for public blockchains.