Mexico Central Bank Flags Stablecoin Contagion Risk

The Bank of Mexico has issued a warning about stablecoins' potential risks to financial stability. The central bank, Banxico, stated that stablecoins' reliance on short-term U.S. Treasuries creates vulnerability to stress.

Banxico cited rapid growth and links to traditional finance as factors contributing to the risk. Market concentration, with two issuers controlling 86% of supply, and past depegging episodes underscore sector fragility, according to the report.

The central bank warned that diverging regulatory approaches create growing risk sources as frameworks like the EU's MiCA and the U.S. GENIUS Act impose different reserve, redemption, and depositor-protection requirements.