The Federal Reserve released its latest Monetary Policy Report on Friday, classifying the stablecoin industry, especially the algorithmic stablecoin, as a risk of financial instability. Meanwhile, he expressed concern about the concentration of fiat-backed stablecoins in Tether’s USDT and Binance’s BUSD.
Fed’s latest view on Stablecoins
Given the fast-growing digital asset market, the Fed Highlighting The “structural vulnerabilities” of the sector embodied by the “collapse of the value of certain stablecoins” in the monetary policy report submitted to Congress.
Although we didn’t directly name Stablecoin (UST), an algorithm that plunges the market in May, the Fed hinted at the project as an indicator of variable vulnerabilities within the industry. However, Stablecoin, backed by fiat money, is much more focused and capitalized and is of interest to central banks.
Given that USDT, USDC, and BUSD make up the overwhelming majority of Stablecoin’s market capitalization, the Fed could exacerbate the lack of transparency in the underlying assets that underpin them and the vulnerability of the assets. We have outlined the basic risks of sexuality. It is fixed at 1: 1 to the US dollar.
“Stablecoin, which is not backed by safe and sufficiently liquid assets and is not subject to appropriate regulatory standards, poses risks to investors and is a financial system that includes susceptibility to potentially volatile practices. Brings risk to. “
The President’s Working Group, a joint effort involving the Federal Reserve, the Securities Trading Commission, and the Commodities Futures Trading Commission, previously shared similar concerns and issued stablecoins to insured depositors. Insisted on limiting. By imposing clear criteria on which institutions are eligible to issue stablecoin, agencies believed that such a move could mitigate the risk of this type of asset.
In addition, the Fed has recommended a set of clear restrictions on the use of stablecoin for leveraged trading.
“Increased use of Stablecoin to meet margin requirements for leveraged transactions in other cryptocurrencies can increase fluctuations in demand for Stablecoin and increase the risk of redemption.”
US Government Agency on Stablecoins
Stablecoin has been in the spotlight of government officials and regulatory agencies for the past few weeks. Spectacular collapse Of Terra’s UST.Following such a blunder, SEC Commissioner Hester Peirce voiced The urgency of regulating these assets with a “trial and error” approach:
“There are various potential options for approaching Stablecoin … and experiments need to give room for failure.”
Previously US Treasury Secretary Janet Yellen Said Stablecoin is not properly supervised in the United States and lawmakers recommend that they must “act quickly” to establish an asset regulatory framework.