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US Federal Reserve: stablecoins have shown the structural weaknesses of cryptocurrencies

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US Federal Reserve: stablecoins have shown the structural weaknesses of cryptocurrencies

The Board of Directors of the US Federal Reserve released a report calling stablecoins a “potential risk to the financial stability of traditional markets.”

In a monetary policy report , Fed directors write that “the collapse in the value of certain stablecoins” and “recent troubles” in the cryptocurrency market reveal “structural weaknesses” in digital assets. Of course, we are talking about the collapse of the UST stablecoin and the entire Terra ecosystem in early May.

“Stablecoins that are not backed by safe and sufficiently liquid assets, and that do not fall under the appropriate regulatory standards, create risks for investors and, potentially, the financial system. These vulnerabilities can be exacerbated if there is a lack of transparency about the risk and liquidity of the assets to back the token,” the report emphasizes.

Note that Fed Chairman Jerome Powell is due to address the Senate Banking Committee on June 22. It is possible that regulation of stablecoins and cryptocurrencies in the US will also be discussed.

Previously, the Office of the Comptroller of the US Currency warned about the risks of stablecoins for investors and the financial system .

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