Crypto Requires 'Improved Decentralized Stablecoins', States Ethereum Co-Founder Vitalik Buterin

Vitalik Buterin Calls for Stronger, More Independent Stablecoins

Vitalik Buterin, one of Ethereum’s co-founders, has expressed concerns about the current state of decentralized stablecoins. He believes that these digital assets are not robust enough to support the long-term ambitions of the cryptocurrency sector. Buterin emphasized the need for innovative stablecoin models that reduce reliance on the U.S. dollar and are less susceptible to influence from powerful individuals or entities.

Key Issues with Existing Stablecoins

In a recent social media post, Buterin identified three major vulnerabilities in today’s stablecoin designs:

• Dependence on a single fiat currency as a price anchor
• Oracle mechanisms that can be manipulated by large financial players
• Staking incentives that distort the economic stability of stablecoins

Rapid Growth and Institutional Adoption

Stablecoins—digital currencies engineered to maintain a consistent value, often linked to the U.S. dollar—have quickly become a dominant force in the crypto market. In 2025, the total market value of stablecoins jumped by 49%, reaching $306 billion by year’s end. This surge was fueled by clearer regulatory frameworks and increased interest from major financial institutions.

Traditional banks and fintech companies are now considering launching their own tokens, while established crypto firms use stablecoins to connect conventional finance with blockchain technology. For example, World Liberty Financial, a crypto initiative supported by Donald Trump, introduced its own dollar-pegged token, USD1, last year.

Debate Over the Future of Stablecoins

The mainstream adoption of stablecoins has reignited debates within the crypto community. Some argue that stablecoins should remain a decentralized alternative to traditional finance, while others see them evolving into regulated financial instruments. Critics caution that stablecoins managed by corporations and backed by government-issued currency could compromise the original principles of cryptocurrency, such as privacy, resistance to censorship, and independence from state control.

Expert Perspectives on Stablecoin Weaknesses

Georgii Verbitskii, the founder of crypto investment platform TYMIO, echoed Buterin’s concerns, noting that the current stablecoin framework has fundamental flaws. He stated, “If stablecoins are to provide lasting stability, especially on a global scale, relying on a single fiat currency like the U.S. dollar is inherently risky.”

Verbitskii further explained that leading tokens like Tether’s USDT and Circle’s USDC are already highly institutionalized, with centralized oversight and exposure to fiat currency inflation. He suggested that a truly global stablecoin should not be tied to any one nation, but instead be backed by a diverse mix of assets or commodities and protected by mechanisms that are difficult to manipulate.

Long-Term Risks and the Need for Innovation

Buterin warned that even stablecoins pegged to the U.S. dollar face long-term risks. He argued that while tracking the dollar may work in the short run, true resilience requires independence from any single currency. He questioned what would happen if the dollar were to experience significant inflation over the next two decades.

He also pointed out that most decentralized stablecoins depend on oracles, which can be compromised if enough capital is deployed against them. Without improved designs, these systems must extract significant value from users to protect themselves, which can make them less appealing and less equitable.

Buterin criticized financialized governance models, stating that they lack effective defenses and rely on high extraction levels to maintain stability.

Calls for Infrastructure Improvements

Boris Bohrer-Bilowitzki, CEO of Concordium, a layer-1 blockchain company, told Decrypt that the decentralization of oracles is a technical challenge that requires real infrastructure solutions rather than superficial governance changes. He observed, “Many current projects focus too much on partnerships with traditional finance and enterprise adoption, sometimes neglecting core principles like regulatory compliance, security, and resilience.”

Staking Yields and Stablecoin Competitiveness

Another issue highlighted by Buterin is the impact of staking yields. If stablecoin holders earn only modest returns while staking offers much higher rewards, stablecoins become less attractive by comparison. To address this, Buterin proposed several strategies, such as significantly reducing staking yields, developing safer staking options, or integrating slashable staking with stablecoin collateral.