As the legislative process for stablecoin progresses, more and more people are concerned that this will lead to a closer connection between the encryption ecosystem and the TradFi world, posing potential risks.

On November 11, 2022, the world's second largest encryption exchange FTX declared bankruptcy due to a liquidity crisis, which was referred to as the "Lehman moment" for cryptocurrencies by then U.S. Treasury Secretary Janet Yellen. The resulting industry crisis spread to nearly all related institutions, markets, or regions.
The collapse of the cryptocurrency market, although causing the stablecoin USDT issued by Tether to fall below its pegged value to the US dollar, did not have a substantial impact on the US Treasury market at the time. At that time, Yellen stated that stablecoins like USDT do not pose systemic risks to the financial system because they are too small in scale. However, if the stablecoin market reaches a certain scale, things may not be so simple. Moody's Vice President and Senior Analyst for Digital Assets Cristiano Ventricelli said: "If there is a sudden loss of confidence, regulatory pressure, or market rumors, it could trigger mass liquidations, which may depress Treasury prices and disrupt the fixed-income market."
Corey Frayer, who served as an advisor on cryptocurrency issues for the SEC during the Biden administration, recently stated that if stablecoins expand significantly or if banks issue their own stablecoins, a run on the bank could be triggered when stablecoin holders attempt to redeem them for actual cash. Frayer said, "The stablecoin bill creates a transmission channel from the highly unstable encryption ecosystem to the TradFi sector, which is very dangerous."
On June 24, the Bank for International Settlements (BIS), known as the "central bank of central banks," pre-released a special chapter of its annual economic report, dousing stablecoins with cold water.
The BIS believes that, despite the prospects shown by stablecoins in tokenization, they have not yet met the requirements to become a pillar of the monetary system in terms of singularity, resilience, and integrity, even raising concerns about their use in financial crimes such as money laundering and terrorism financing. The report states that crypto assets and stablecoins "can at best only play a supporting role." The BIS considers that stablecoins have become the preferred tool for illegally circumventing integrity safeguards. The anonymity of public chains, where individual users' identities are hidden behind addresses, can protect privacy but also facilitates illegal use. The lack of "Know Your Customer" (KYC) standards in the stablecoin space exacerbates this issue. The day before, the traditionally cautious EU also pointed its finger at the risks of stablecoins.
European Central Bank President Christine Lagarde stated at a hearing of the European Parliament's Economic and Monetary Affairs Committee in Brussels that stablecoins "pose risks to monetary policy and financial stability" because they may attract outflows from bank deposits and do not always maintain their fixed value. All the controversies and concerns will gradually become clearer in the games of the House of Representatives, and even if the GENIUS Act is ultimately passed, it will still need to undergo real market tests.