RBC Imagine™: Canadian Banks

Research evidence excerpt

RBC Imagine™: Canadian Banks

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wallets. An example was the hack of ByBit, a crypto asset exchange, where US$1.5 billion

was stolen by illicit actors in 2025.

• Disruptions of monetary policy: We believe Canadian monetary sovereignty could also

be at risk, as broader access to stablecoins backed by foreign currencies (most

commonly the U.S. dollar) could reduce the effectiveness of domestic monetary policy

transmission and foreign exchange/capital control regulations. Stablecoin issuers were

one of the largest buyers of U.S. T-bills in 2024, which could also hinder the pass-through

of monetary policy in the U.S.

• Potential impact on market yields and liquidity: For instance, some stablecoin issuers

rely on reverse repos to generate additional income, which could strain repo market

liquidity with spillovers on other short-term dollar funding markets during market stress.

One risk identified by the BIS and the IMF is that large-scale stablecoin redemptions

could force fire sales of safe assets and amplify bond market volatility.

• Financial system & contagion risks: A run on stablecoin reserves could result in the

banks that hold these reserves to face a liquidity crisis and potentially trigger bank

failures. The de-pegging of stablecoins as a result would undermine the confidence in

the ecosystem. When Silicon Valley Bank failed in March 2023, US$3.3 billion in reserves

for Circle’s USDC were trapped at the bank, and USDC’s value declined sharply.

Furthermore, the 24/7, instantaneous settlement nature of DLTs could amplify and

spread contagion faster, especially as DLT networks increase dependencies and

interconnectedness among market participants, whereas impacts to the traditional

financial system would typically take time to materialize, in our view.