New Federal Reserve Paper Warns of Stablecoin Congestion Runs

A new research paper from Federal Reserve economists suggests that fully backed stablecoins could still face sudden bank runs if public blockchains experience severe transaction congestion. The study focuses on how high gas fees and network bottlenecks can make small payments too expensive to process. When network activity slows down and usefulness drops, users may start exiting the system rapidly.

The research points out an important detail about how these token exits work in practice. The data shows that drops in circulation on busy networks like Ethereum often include both direct cash outs into fiat currency and migrations to cheaper alternative blockchains. The authors analyzed historical data from late 2017 through 2025 and found that transaction fees frequently outpaced the actual value of smaller transfers during peak congestion periods.

This finding raises new questions for regulators as officials work to implement the upcoming GENIUS Act. While the new framework focuses heavily on ensuring stablecoin issuers hold proper reserves and assets, it does not currently set any price or capacity standards for the underlying public blockchains that move those tokens.

Traders and market participants should watch how lawmakers address blockchain infrastructure limits alongside reserve requirements. As public networks grow busier, managing transaction costs and network capacity will remain a critical piece of the puzzle for maintaining stablecoin stability.