Cryptocurrency markets, despite a total value of $3.2 trillion and daily trading volumes around $197 billion, face increasing scrutiny from regulators and investors concerned about potential spillover effects on the broader financial system. The largest cryptocurrency, Bitcoin, recently dipped below $90,000 for the first time since April, contributing to a $1.2 trillion wipe-out across all cryptocurrencies in just six weeks. Bitcoin’s movements increasingly mirror broader risk appetite, evidenced by its correlation with the S&P 500 reaching 0.84 this week, the strongest in six weeks.
One area of intersection between crypto and mainstream markets is stablecoins, cryptocurrencies pegged to real-world currencies like the U.S. dollar. Tether, based in El Salvador, dominates the stablecoin market with approximately $181 billion in reserves, including $112 billion in U.S. Treasuries. Circle holds $24 billion in U.S. Treasuries. Financial stability experts warn that large redemption requests could trigger runs on stablecoin reserves, impacting banks and the assets backing those reserves.
Banks are gaining exposure to crypto through crypto-linked clients, stablecoin reserves, and crypto-related services. Data indicates that while bank exposure to crypto is small, it is growing. For example, in 2024, significant institutions in the Euro zone provided €4.7 billion worth of crypto asset custody services, a substantial increase from €400 million in 2023, according to the European Central Bank. Furthermore, the U.S. regulator’s approval of Bitcoin exchange-traded funds (ETFs) in January 2025 has drawn interest from institutional investors.
The number of digital asset exchange-traded products worldwide has surged to 367 in 2025, up from 104 in 2021. These crypto ETPs manage $222.3 billion in assets. For context, Tether is a financial technology company that operates the blockchain-enabled platform that powers the largest stablecoin by market capitalisation. Circle is a global financial technology firm that provides payments and digital financial infrastructure for businesses of all sizes.
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