STABLECOIN THAT ARE NOT SAFE AND DO NOT FOLLOW REGULATORY STANDARDS ARE RISKY TO INVEST: FED
The Federal Reserve Board of Governors has identified stablecoins as a potential risk to financial stability amidst the volatile crypto market.
In a report on Monetary Policy released on Friday, the Federal Reserve System's governing body said "a decline in the value of the fixed currency" - possibly referring to TerraUSD (UST) from the US dollar in May - further. "The latest trends" in the digital commodity market have highlighted "structural weaknesses." The government department referred to a report by the President’s Working Group on Financial Markets of November 2021, in which officials said the law was “urgently needed” to address financial risks.
"Stablecoins that are not backed by assets that are safe and adequate and not under appropriate regulatory standards create risks for investors and potential for the financial system, including exposure to potentially disruptive transactions," the Fed report said. "These risks may be exacerbated by a lack of transparency in terms of risk and weakness of assets that support stablecoins."
The report comes ahead of Fed Fed Jerome Powell's testimony before a Senate banking committee, scheduled to begin on June 22. In a statement at a research conference sponsored by the Federal Reserve Board on Friday, Powell noted that the central bank's digital currency could "help keep the foreign exchange rate stable". . ”
Following the collapse of the UST - where stablecoin fell from the dollar and later contributed to the collapse of the Terra ecosystem - Treasury Secretary Janet Yellen called for a "consistent organizational structure" on stablecoins by the end of 2022, pointing to "the risks of financial stability." of the congress later reported that the stablecoin industry was "not sufficiently controlled" in its analysis of the Terra crash.
Acting as the largest bank in the United States, policy on the Fed has the potential to have a significant impact on the crypto environment, including the possible release of a digital dollar. On Wednesday, the Fed announced it would raise interest rates by 75 points - the largest increase in 28 years - in an effort to curb inflation.