Says stablecoins shouldn be like casino

says stablecoins shouldn be like casino

Janson. Janson further reiterated that there are still some problems. “The authorities are obsessed by the idea of a new liquidity crisis, like the one that happened in 2008,” she added.

When the market realized the Lehman Brothers financial products were mostly based on worthless assets during the subprime mortgage era, nobody wanted to be associated with them, a move that drove banks into a major financial catastrophe.

Have you ever thought of what would happen should stablecoins face the same scenario as that of the Lehman Brothers since these coins aren’t 100% transparent regarding their reserves? “For example, some stablecoins may be tied to debt from Evergrand (the Chinese real-estate giant verging on failure), as has been suggested for Tether.


Federal Reserve attorney Jeffery Zhang and Yale professor of finance Gary B. Gorton have laid out two possible choices as a working regulatory framework for stablecoins. In a lengthy paper titled “Taming Wildcat Stablecoins”, the pair proceed to compare stablecoins to the “world of wildcat banking.”

The two prominent researchers argue that stablecoins can’t be considered as an efficient payment method because they are “not always accepted at par and are subject to runs.” They further match stablecoins to the Free Banking Era — a period in the 19th century when banks were authorized to issue their own banknotes against their deposits of gold and silver.

It’s the result of a speedy rise in worth: the market worth of the entire stablecoins was standing at around €157 billion USD in December 2021, “an increase from $5.6 billion at the start of 2020”, according to the FBS.

Tethers, for instance, seem to have increased in value, something that has made financial authorities in many places across the globe become somewhat concerned. In a meeting held on August 2021, the United States Federal Reserve voiced its concerns on the dangers of stablecoins. “The questions being asked are how to be sure that [the creators] really have the necessary reserves and whether Tether is about to fail,” further stated Vincent Boy.

One of the most telling pieces of evidence is the significant rise in the popularity of stablecoins, signaling the “democratization of investments in cryptocurrency,” said Boy.

Says stablecoins shouldn be like casino-x

He stated:

“In particular, you wouldn’t need stablecoins, you wouldn’t need cryptocurrencies if you had a digital U.S. currency – I think that’s one of the stronger arguments in its favor.”

However, it is greatly unlikely for CBDCs to substitute stablecoins. For one, looking at China’s e-CNY whitepaper, it becomes obvious how CBDCs have the dangerous potential to trace transactions. Privacy concerns have always been linked to CBDCs, but they’re now anticipated to only get worse.

In addition, stablecoins are now a substantial part of the global economy.
As covered by The Tokenist, stablecoin transactions volume totaled a staggering $1.7 trillion in the second quarter of 2021. In comparison, this figure was up 1,090% year-over-year and 59% compared to Q1 of 2021.

It is widely believed that stablecoins are the backbone of the digital asset ecosystem.

Says stablecoins shouldn be like casinos

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Says stablecoins shouldn be like casinoz

The growth and expansion of stablecoins increased throughout 2021 “despite concerns about regulatory compliance, quality and sufficiency of reserve assets, and standards of risk management and governance,” a statement from the global organization formed by the G20 in 2009 read, and very certain to cause harm to global financial security.

Stability in a world that’s already volatile?

Stablecoins’ role as the financial villain may appear quite strange for an e-money whose initial desire in the first place was to “put the brakes on the volatility of Bitcoin and to rightly bring a bit of stability into this sphere,” says Nathalie Janson, specialist, and economist in cryptos at Neoma Business School.

Stablecoins are cryptocurrencies whose prices never differ since they are indexed using a base reference such as the United States dollar.

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September that a stablecoin could be considered a security and therefore required regulation by the SEC.

Following thereportby the Treasury on stablecoins, Gensler compared stablecoins to a teenager, noting that he believes the currency won’t reach “adulthood” without being accompanied by regulatory oversight such as money laundering regulations and tax compliance.

The government report released prior to Gensler’s comments noted:

“…a consistent and comprehensive regulatory framework is needed both to increase transparency into key aspects of stablecoin arrangements and to ensure that stablecoins function in both normal times and in stressed market conditions”.

Stablecoins have grown rapidly since their inception, with a current market capitalization by the largest stablecoin issuers exceeding $127 billion according to the Treasury report.

Tether was under investigation for issuing stablecoins backed without cash reserves. Tether’s $69 billion worth of stablecoins (issued, authorized or both) are supposed to be backed by USD. However, no entity can validate the $69 billion reserve.

Interestingly, 30% of the Tether under circulation was issued in 2021.

Despite inadequate proof, the stablecoin is relevant in crypto circles and used extensively, so much so that it ranks fourth in terms of market capitalization.

Crypto Twitter is abuzz with questions on Tether’s reserves and where the company holds the USD that backs its stablecoins. An anonymous blog post titled “The Bit Short: Inside Crypto’s Doomsday Machine” recently went viral.

At a meeting of the President’s Working Group on Financial Markets, Treasury Secretary Janet Yellen asserted that stablecoins should be “quickly” regulated. Considering how stablecoins are poised to become key components of the global economy, it’s fair to see regulations as a necessary part of stablecoin infrastructure moving forward.

However, a key question is how policymakers can—or will—regulate stablecoins. In other words, what could stablecoin regulations look like?

Yellen Asks For Quick Regulation on Stablecoins

Lately, stablecoins have been subject to hostility from officials all around the world.

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