Stablecoins: the crypto house?

In the latest video report from Cointelegraph, we discussed the systemic risks that stablecoins pose to the stability of both crypto and traditional markets.

Stablecoins have become the backbone of the cryptocurrency ecosystem as they play an important role in the functioning of cryptocurrency trading and decentralized funding. Their market capitalization has quadrupled since early 2021.

But the lack of transparency in supporting stablecoins has led many to wonder if their growth is really sustainable. Recent disclosures of large stablecoins show that only a fraction of their reserves are made up of cash, while a significant portion is held as riskier assets like commercial paper.

Some analysts fear that in the event of a market downturn, stablecoin issuers could struggle to meet their customers’ buyback requests. This has the potential to collapse investor confidence in these stablecoins, with dire consequences for the crypto market as a whole.

Frances Coppola, financial commentator and vocal stablecoin critic: “It’ll be fine as long as people believe it’s okay and they’re all using it for their own transactions and nobody else. Never try to withdraw money.”

Governments around the world are also concerned that a stablecoin crisis could spill over into traditional financial markets and are calling for tighter regulation.

How serious are the risks of stablecoins? What are the possible scenarios after a major stablecoin crash? And what can be done to reduce the risk?

To find out, watch the full video on our YouTube channel and don’t forget to subscribe!