EU Regulators Intensify Scrutiny on Tether and USDC Over Stablecoin Reserve Risks

Private stablecoins such as Tether (USDT) and Circle’s USDC are facing growing institutional criticism as European regulators tighten oversight on unauthorized digital assets. Speaking at the Digital Money Summit 2026 in London, financial experts warned that the reserve structures backing major dollar-pegged stablecoins may expose investors to hidden market risks.

Christoph Hock, Head of Tokenization and Digital Assets at Union Investment, one of Germany’s largest asset managers overseeing nearly $620 billion in assets, argued that leading stablecoins no longer function as true fiat-backed digital currencies. According to Hock, the composition of reserves held by companies like Tether resembles a speculative investment fund more than a stable financial instrument.

Hock pointed specifically to Tether’s large holdings in gold and bitcoin, claiming these assets introduce volatility that contradicts the core purpose of stablecoins. He warned that such reserve strategies effectively transform stablecoins into “stealth hedge funds,” exposing corporate treasuries and institutional investors to unexpected financial losses.

The criticism comes as regulators across Europe increase pressure on crypto firms operating without full compliance under emerging digital asset frameworks. Hock also referenced past instability involving USDC, including previous de-pegging incidents that temporarily pushed the token significantly below its intended $1 value.

One notable market event saw USDC fall to as low as $0.74 during periods of extreme liquidity stress. Another major de-peg occurred following the collapse of a crypto-friendly banking institution, causing the stablecoin to drop roughly 13% while Ethereum transaction fees surged.

Hock emphasized that institutional investors relying on stablecoins for overnight settlement and treasury management cannot tolerate sudden mark-to-market losses on cash-equivalent assets. He argued that these risks undermine the foundational promise of stablecoins as reliable fiat-pegged digital currencies.

Tether’s gold reserves reportedly reached approximately 148 tonnes by January 2026, valued at nearly $23 billion, placing the company among the world’s largest gold holders.