Lack of transparency regarding reserve assets in stablecoins
To ensure that the conversion of stablecoins back into fiat funds does not cause concern among investors, it is necessary to ensure their liquidity. Increasing reserve losses will easily trigger a loss of confidence, and escalating redemption demands can lead the financial system to collapse. The influence of some stablecoins that have already reached the value of MMF fiat assets will grow steadily. To understand what risks accompany the widespread use of stablecoins, you need to know exactly about the composition of reserve assets. While there is no exact information, the use of stablecoin as a reliable investment tool is a big question.
Urgent implementation of regulatory and supervisory mechanisms will reduce the risks
So far, there are no stable ties between the crypto market and the traditional financial system. However, the development of the stablecoin market is steadily growing due to the interest of institutional investors with the increasing role of banks. Without a doubt, a sharp interest in stablecoins will increase with the large-scale release of stablecoins by high-tech companies. In addition, the popularity of stablecoins is influenced by their accelerated integration into users' wallets. Pax Dollar stablecoins in Guatemala, and a pilot version of the Facebook Novi wallet are running in the US. Without the rapid creation of a supervisory, regulatory body, stablecoins can disrupt financial stability.
In recent years, the capitalization of stablecoins has reached $120 billion. They will perform many different functions in the rapidly growing cryptocurrency ecosystem. Stables are a digital expression of the price of cryptocoins created on the basis of blockchain technologies. By this time, stables account for approximately 6 % of the capitalization of cryptoassets. At the same time, the functionality of stablecoins is constantly growing.