Stablecoins pose a growing systemic risk to financial markets, according to rating agency Fitch, which warned that short-term credit markets could be destabilised in the event of a stampede to convert cryptocurrencies into traditional money.

The warning comes as regulators have tightened their focus on the potential impact of digital assets such as tether, the most widely used stablecoin, on traditional financial markets. Boston Federal Reserve president Eric Rosengren said last month that stablecoins represent a “financial stability concern” unless regulators take steps to take control of the rapidly expanding market.

“The rapid growth of stablecoin issuance could, in time, have implications for the functioning of short-term credit markets,” said Monsur Hussain and Alastair Sewell at Fitch in a commentary note. “Potential asset contagion risks linked to the liquidation of stablecoin reserve holdings could increase pressure for tighter regulation of the nascent sector,” they added.