On any list of oxymoronic investments, stablecoins might deserve a spot right near the top.

A stablecoin is, by definition, a variety of cryptocurrency meant to remain stable, being pegged to another very reliable asset. For most, we're talking about US Treasury securities. Sure, stablecoins can use commodities, reserves of traditional assets and employ algorithms to control supply and maintain their peg.

But since virtually all financial roads eventually lead to US government debt, crypto enthusiasts know that the foundations underneath digital assets of all stripes are dollars. And that's its own existential challenge for the crypto world.

Between the US national debt topping US$38 trillion, President Donald Trump's chaotic trade war, efforts to replace the dollar as the world's reserve currency and gold surging to all-time highs, the stability sales pitch from the crypto crowd has more than a few cracks.

Yet the risk that this dynamic goes the other way, too, is getting increased attention.

The International Monetary Fund is warning that the $305 billion stablecoin market could threaten traditional lending, undermine the effectiveness of monetary policy and trigger runs on some of the globe's safest assets.

The fact that stablecoins are backed by old economy fiat currencies makes them, in theory, far less volatile than, say, bitcoin. Yet the medium's rapid growth and its increasing connections to mainstream finance — including US Treasuries — have regulators and watchdogs worried.

"Because stablecoins may be subject to run risk," the IMF says, "fire sales of their reserve assets — such as bank cash deposits and government securities — could spill over into bank deposits and government bond and repo markets. This could increase volatility and require central bank intervention."

How just interventions might work is anyone's guess but there is a growing concern given the market's rapid growth. The passage of the US GENIUS Act, which established a new regulatory framework for digital tokens in July, is expected to turbocharge the market.