According to the Financial Stability Oversight Council of the U.S Treasury Department, stablecoins are a good bridge for the digital assets market with the broader financial systems.
The FSOC’s 2024 annual report span size=”font weight: 400 ;”>, states that the cryptocurrencies called stablecoins, which are currency or commodity-pegged cryptocurrencies, do not provide adequate protection against failures and risks.
According to the FSOC, the absence of preventative measures is more alarming because USDT-issuer Tether holds more than 50% of the total stablecoin market’s value.
According to FSOC, USDT has a total market capitalization of $138 billion and represents around 70% the global market for stablecoins.
According to the council, many stablecoin issues operate outside the prudential regulatory frame work. This increases fraud risk.
” While a few reserve managers are required to report regularly, they provide only limited information that can be verified about the holdings of their reserves and management practices.”
In light of the continuing growth in the crypto-market, the FSOC encourages lawmakers to enact legislation to reduce the risks associated with stablecoins.
The Council recommended that Congress create legislation to establish a federal framework to protect investors and consumers, as well as to provide a robust regulatory environment for stablecoin issues. This would address the run-risk, payments system risk, market integrity and other risks.
You can read the entire report by clicking here.
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As new information becomes available, this post Treasury Department’s FSOC says Stablecoins represent a potential risk to US financial stability may be updated.
