The Hidden Risks of Stablecoins: Why Gold Remains the Real Safe Haven

What Exactly Are Stablecoins?

Stablecoins are a type of cryptocurrency designed to avoid the price swings that make coins like Bitcoin so volatile. Unlike Bitcoin or Ethereum, which can fluctuate dramatically within hours, stablecoins are pegged to reserve assets to hold a steady value. Most are pegged to the U.S. dollar, meaning each coin is designed to maintain a $1 value. Popular examples like Tether (USDT) and USD Coin (USDC) are backed by reserves of dollars or dollar-equivalent assets, which support this 1:1 peg.

Today, more than 98% of all stablecoins are pegged to the U.S. dollar, making it the dominant reference currency for the industry. While some stablecoins are tied to other currencies or even commodities like gold, the overwhelming majority are linked to the dollar. This design gives users confidence that their digital tokens will remain stable, at least in theory, even during times of financial stress in the broader crypto markets.

Why Stablecoins Are Gaining Popularity

Stablecoins have become a critical part of the digital economy. Traders use them to move quickly in and out of volatile crypto positions, while businesses and individuals rely on them for fast, low-cost transactions. They are especially valuable for cross-border payments, allowing money to move across countries without the high fees and long settlement times of the traditional banking system.

In parts of the world where local currencies are collapsing, such as Venezuela or Argentina, stablecoins have provided a lifeline. Families can store value in a currency pegged to the U.S. dollar, avoiding the devastating effects of runaway inflation. In fact, according to recent reports, transaction volumes for some of the largest stablecoins have exceeded Visa and Mastercard, showing just how deeply they are becoming woven into the global financial system.

The GENIUS Act and Stablecoin Regulation

With stablecoins moving into the financial mainstream, lawmakers are stepping in to provide guardrails. In the United States, one of the most important pieces of proposed legislation is known as the GENIUS Act. This bill is designed to establish clear standards for stablecoin issuers, including strict requirements for reserve backing, independent audits, and transparency in how coins are managed.

The goal of the GENIUS Act is to ensure that stablecoins can function safely as part of the financial system without creating systemic risks. Supporters argue that it could give stablecoins the regulatory legitimacy they need to be widely adopted for payments, lending, and even government-backed programs.

Critics, however, worry that too much regulation could stifle innovation or push stablecoin activity offshore. For individual users, it raises fears about loss of financial autonomy. The appeal of stablecoins originally lay in their ability to operate outside traditional banking hours, across borders, and with fewer restrictions. If stablecoins become heavily bank-regulated, many worry that the government could freeze accounts, block transactions, or monitor financial activity in ways that undermine privacy and freedom.

The debate reflects a broader tension: stablecoins are growing so fast that they now rival traditional payment networks, yet they operate in a gray zone between banking and crypto.

Risks and Regulatory Concerns

While the appeal of stablecoins is clear, they also come with important risks. The collapse of TerraUSD in 2022 was a stark reminder that not all stablecoins are truly "stable." That algorithmic coin, which attempted to use software alone to maintain its peg, failed catastrophically and erased tens of billions in value. Even among fiat-backed coins like Tether, questions remain about the transparency and quality of their reserves. Regulators have warned that if investors rush to redeem stablecoins during a crisis, it could create ripple effects across the broader financial system.

One major drawback is interest.  With stablecoins, banks keep the yield for themselves. If you hold $25,000 in a high-yield savings account at 4 percent, that's $1,000 a year you'd normally earn. With stablecoins, that income flows to the bank instead of to you.

Another drawback is protection. Traditional deposits are insured by the federal government through the FDIC, which means you're protected if your bank fails. Stablecoin accounts don't carry that same safety net. Regulators treat them as "investments," not deposits, which means you're taking on additional risk just by holding your money in this new form.

Bankers themselves admit the situation feels eerily similar to the "wildcat banking" era of the 1800s. Back then, small state banks issued their own currencies, which often collapsed in waves of mini financial crises until the federal government stepped in to impose order. Critics worry history may be repeating itself, only this time with digital dollars.

Governments are starting to respond with legislation, like the Stablecoin GENIUS Act, which is being debated to set clear standards for reserve quality, audits, and oversight. Internationally, the Bank for International Settlements has warned that stablecoins could undermine monetary sovereignty and financial stability if left unchecked.

The Case for Gold-Backed Stablecoins

Some innovators have tried to blend the best of both worlds by introducing gold-backed stablecoins such as Tether Gold (XAU?) and Pax Gold (PAXG). These tokens are backed by physical bullion held in reserve and give investors fractional access to gold through blockchain technology. In theory, this offers the digital convenience of stablecoins while being tied to an asset with thousands of years of proven value.

But while gold-backed tokens are an interesting development, they still live in the digital ecosystem. That means they are subject to the same risks of custodial trust, regulatory scrutiny, and technological vulnerability that apply to all cryptocurrencies. If the platform managing a gold-backed coin fails, investors could find themselves locked out of their holdings, regardless of how much gold was supposedly sitting in a vault.

Why Physical Gold Still Stands Apart

Gold has helped preserve wealth through every economic era, from ancient civilizations to modern financial crises. Unlike digital tokens, physical gold requires no software, no audits, and no regulatory approval to validate its value. It cannot be erased, hacked, or "depegged" from the dollar. It simply is, and has always been, a universally recognized store of wealth.

In 2025 alone, gold has risen more than 27%, once again demonstrating its role as a safe haven in uncertain times. While stablecoins may offer convenience and flexibility for transactions, they do not replace the certainty of owning real, tangible gold. Digital systems can fail. Political landscapes can shift. Algorithms can break. But physical gold remains immune to those risks, providing true independence for investors looking to protect their wealth.

Final Thoughts

Stablecoins are an important financial innovation. They provide stability in the digital world, improve payment systems, and give millions of people new access to the global economy. For some, they represent a bridge between the traditional banking system and the crypto universe.

Yet, for long-term wealth protection, nothing matches the track record of gold. While stablecoins are designed to hold value, physical gold has proven to actually preserve it, through inflation, recessions, currency crises, and global uncertainty. At Lear Capital, we believe investors should understand both worlds. But when it comes to protecting your future, gold still stands in a class of its own.

At Lear Capital, we’re here to help you evaluate your options, whether that means adding physical silver to your holdings, exploring a precious metals IRA, or building a strategy that includes both gold and silver. Call our team at 855-271-2873 to lock in today’s price before the next major move.