Tether: Stablecoin looks shaken by stable foundation

stablecoins, it turns out, may not be so stable. These digital assets, which are linked to the value of state -spent currencies, are said to be the safest part of the volatile cryptoma market. Her supposedly firm value has made it a cornerstone of the crypto ecosystem.

But stablecoins do not do justice to their bill. Tether, the largest of these tokens with a circulation of around $ 82 billion, briefly lost its bond on Thursday. It fell to 95.08 cents before recovering.

The decoupling, as well as it may be, should worry the wider market. The size of the StableCoin industry-according to the Federal Reserve in March $ 180 billion-makes it a source of potential systemic risks.

The argument behind stablecoins is based on the assumption that the issuers have the funds available to pay them to pay Coin owner everyone trying to redeem their token at the same time. But that's hardly an iron premise.

In the case of Tether, cash and bank deposits made up only 5 percent of his assets at the end of December. Treasuries made up about 44 percent, while Commercial Paper and deposit certificates made another 30 percent.

When Tether decides to liquidate his $ 34 billion in government bonds or his $ 24 billion in corporate bonds to defend the token, the effect on the bond dates and the first -class money market will have. It is even more worrying that around 6 percent-or $ 5 billion-is in other investments, including other cryptocurrencies. These could prove to be illiquid and difficult to sell during stress times.

All of this presupposes that the numbers of Tether - which were published by an auditing company based on the Kaiman Islands - are reliable. Last October, Tether was fined $ 41 million because it was claimed that it made misleading statements from at least June 2016 to February 2019.

The regulatory authorities should determine clear liquidity rules on which secure assets should keep stable coin emitters. The requirement of detailed, current reports on the composition of these reserve stocks would provide information about where there is risks.