FED Officials Announce: “This Stablecoin Is Dangerous To The USA!”

In a new paper published Monday, New York Fed researchers report on Circle’s USDC He wrote that the rise of the stablecoin is a threat to the overall financial system as it could increase risks from smaller distributors.

“Effects of Switching from Other Stablecoins to USDC A Threat to the Financial System”

In the published article, the following statements were used about the USDC token, which can take the throne of Tether:

“The transition from Tether to USDC raises a greater concern, namely, that durable stablecoins may increase the risks of escape from more fragile ones because they provide a convenient means of escape.”

The report, titled “Impacts of Digital Assets on Financial Stability,” comes in the week when the US Financial Stability Oversight Council, a group of regulators led by Treasury Secretary Janet Yellen, prepares to release a report in response to an executive order from President Joe Biden calling for a plan to oversee crypto. .

The report aims to explore the potential dangers digital assets pose to the overall financial system.

In the article, “Cryptocurrency “The effects of stress in the ecosystem on financial stability largely depend on how connected it is to the traditional financial sector.”

In the past, researchers have often pointed to the danger that stablecoins may not be fully supported or pegged at a 1:1 ratio to the dollar.

However, the latest report seems to be about the risk that a much larger token issuer could have the power to knock out their competitors, resulting in a rush for those coins.

To mitigate these risks, the Fed recommends that federal oversight have the power to enforce laws that facilitate interoperability between stablecoins, and that distributors consider a way to limit their relationships with commercial entities.

The report also followed the US President’s Working Group’s recommendation that stablecoin issuers should be insured depository institutions.

*Not investment advice.