In brief
- Vitalik Buterin says today’s stablecoins are too dependent on the U.S. dollar.
- The stablecoin market has exploded to more than $300 billion as banks and institutions embrace the technology.
- Crypto insiders warn that institutional control could undermine the original goal of decentralized, censorship‑resistant money.
Ethereum co‑founder Vitalik Buterin has warned that today’s decentralized stablecoins are not resilient enough to support crypto’s long‑term vision, arguing that the industry needs new designs that are less dependent on the U.S. dollar and less vulnerable to capture by wealthy actors.
In an X post on Sunday, Buterin said existing models suffer from three core flaws, namely reliance on a single fiat price reference, oracle systems that can be manipulated by large pools of capital, and staking yields that distort stablecoin economics.
Stablecoins—cryptocurrencies designed to hold a steady value, usually pegged to the U.S. dollar or other fiat currencies—have become one of the fastest‑growing segments of the digital‑asset market. Total stablecoin market capitalization surged 49% in 2025 to reach $306 billion by December, driven by clearer regulation and growing institutional adoption.
Banks and fintech firms are increasingly exploring launching their own tokens, while major crypto companies have embraced stablecoins as a bridge between traditional finance and blockchains. Among them, the Trump-backed crypto project World Liberty Financial launched its own dollar‑linked token, USD1, last year.
The rapid institutionalization of stablecoins has reignited a long‑running tension inside crypto—whether the technology should serve as a decentralized alternative to the financial system, or evolve into a regulated extension of it. Critics warn that stablecoins run by corporations and backed by government‑issued dollars undermine crypto’s original goals of censorship resistance, privacy, and independence from state control.
Georgii Verbitskii, founder of crypto investor app TYMIO, said that Buterin’s concerns highlight a fundamental weakness in today’s stablecoin model.
“If stablecoins are meant to support long‑term resilience, especially at the level of nation-states or global financial infrastructure, then dependence on a single fiat currency like the U.S. dollar is a structural weakness,” Verbitskii told Decrypt.
“Over a long enough timeline, inflation, monetary policy, and political control inevitably bleed into the system,” he continued.
Verbitskii said that dominant tokens such as Tether’s USDT and Circle’s USDC are already deeply institutional products, with centralized control and exposure to fiat inflation.
“A truly global stablecoin likely needs to be independent from any single state—potentially based on a diversified basket of assets or commodities—and secured by mechanisms that are difficult to capture financially,” he said.
Buterin argued that over the long term, even a stable U.S. dollar peg creates risk. “Tracking USD is fine short-term, but in my opinion, part of the vision of nation state resilience should be independence even from that price ticker,” he wrote. “On a 20-year timeline, well, what if it hyperinflates, even moderately?”
The Ethereum co-founder also warned that most decentralized stablecoins rely on oracles that can be captured if enough money is thrown at them. Without a better design, he said, protocols must rely on high levels of value extraction from users to defend themselves, making the systems less attractive and less fair.
“This is a big part of why I constantly rail against financialized governance,” Buterin added. “It inherently has no defense/offense asymmetry, and so high levels of extraction are the only way to be stable.”
Boris Bohrer-Bilowitzki, CEO of layer-1 blockchain firm Concordium, told Decrypt that oracle decentralization is a problem that “requires actual infrastructure work, not governance theater.”
“Current projects are heavily over-indexed on TradFi partnerships and enterprise buy-in at the expense of fundamentals,” he said. “Partnerships matter for adoption and wide-scale deployment, but they shouldn’t trump regulatory compliance, security, and actual resilience.”
A third problem, Buterin said, is staking yield. If stablecoin users can earn only a few percentage points while staking offers higher returns, then stablecoins become structurally less competitive.
Buterin outlined several possible approaches, including dramatically lowering staking yields, creating safer forms of staking, or finding ways to make slashable staking compatible with stablecoin collateral.
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Source: https://decrypt.co/354269/crypto-needs-better-decentralized-stablecoins-ethereum-founder-vitalik-buterin
