'Safer' stablecoins like circlepay's USDC pose a risk to the financial system in that they could amplify run risks from competitors, a new NYFedResearch paper says. HeleneBraunn reports
The rise of Circle’s USDC stablecoin – as opposed to the controversial tether – is a threat to the broader financial system because it could increase the chance of run risks from smaller issuers, researchers at the Federal Reserve Bank of New York wrote in a new“This substitution from tether into USDC illustrates a bigger concern – namely, that resilient stablecoins can amplify run risks from more fragile ones as they provide a convenient instrument to run to,” the report said.
The U.S. Congress is still in the process of taking action on cryptocurrencies, in particular stablecoins because they pose the largest risk to the broader financial system due to their interconnection to traditional markets. Just Monday, USDT issuer Tether announced it“The implications of stress in the crypto ecosystem on financial stability depend crucially on how interconnected it is with the traditional financial sector,” the paper said.
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