In an interview with CNBC, Eswar Prasad, an Economics professor at Cornell University warned about the repercussions if the stablecoin collapsed.
Professor warned that stablecoin failure could impact the U.S. bond market, indicating potential new areas for investors to watch as the contagion continues to spread through the industry.
Stablecoins are the top choice for cryptocurrency investors as this allows people to trade without converting their funds into fiat currency.
It account for approximately $145 billion out of the $881 billion value of the entire cryptocurrency market.
The issuers of these stablecoins state that they are backed by real-world assets such as fiat currencies and bonds.
Eswar Prasad said regulators are concerned about the impact on traditional financial markets.
He added if such a run occurs, then it would cause users to redeem their crypto assets for fiat and it will cause the issuer to sell off their assets in the reserves, potentially selling large amounts of U.S. Treasurys.