• May 31, 2023


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New York Federal Reserve Points to Risks of Stablecoins for Financial Stability

ByLouis Adams

Oct 6, 2022 ,
Reading time: < 1 minute

Stablecoins add “new vulnerabilities” to the crypto market and financial stability in general, according to a study conducted by the Federal Reserva of New York.

The document talks about the growing risks of the mass conversion of “stablecoins” like USDC into fiat against the backdrop of the rapid development of the DeFi sector.

The reverse is also true. According to the report, forced sales of US Treasury-issued debt instruments could weaken the backing of stablecoins. In particular, these reliable assets have shown significant volatility recently.

The agency experts have touched upon the situation of a decrease in USDT capitalization by $7 billion amid the collapse of the Terra ecosystem. According to them, part of the funds settled in USDC.