ICYMI: Federal Reserve highlights ‘structural fragilities’ in stablecoin market in new report
on stablecoins from November, which argued to limit stablecoin issuance to"insured depository institutions." This more recent report from the Fed continues to promote that joint shared conclusion.
"Stablecoins that are not backed by safe and sufficiently liquid assets and are not subject to appropriate regulatory standards create risks to investors and potentially to the financial system, including susceptibility to potentially destabilizing runs," the report says. There is, indeed, a broader lingering question of whether algorithmic stablecoins can truly maintain value.
The PWG's recommendations did not thoroughly address algorithmic tokens, seeming to limit concerns to the more familiar fiat-backed tokens. The Fed report, though it does not name Terra or UST, specifically notes concentration in the stablecoin market to fiat-backed issuers"Tether, USD Coin, and Binance USD."
In the wake of the UST collapse, several leaders including Treasury Secretary Janet Yellen and Pat Toomey, the leading Republican on the Senate Banking Committee, noted that stablecoins had notAs the current crypto bear market shakes out more and more firms, this test ofKollen Post is a senior reporter at The Block, covering all things policy and geopolitics from Washington, DC.
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