Jakarta, CNBC Indonesia – Rating agency from the United States (US) Fitch Ratings said that stablecoins carry risks that make digital assets vulnerable. This is evidenced by the fall of one of the crypto assets, Terra LUNA.
In its release, Fitch said stablecoins are currently still struggling to gain regulatory acceptance. The reason is that currently digital assets are threatened with risks in maintaining a stable value.
“In the case of UST, the supporting entity’s crypto reserves are not large enough to serve as a source of stability when the UST algorithm’s stake mechanism is under speculative pressure,” the agency said while providing an explanation regarding what happened to TerraUSD, Thursday (12/5/2022).
Fitch himself predicts that LUNA’s downfall will prompt increased calls for stablecoin regulation. The United States (US) Treasury Secretary, Janet Yellen, has said it shows the importance of having a proper regulatory framework for stablecoins.
“EU Market Regulations in Crypto Assets, nearing finalization, will not allow the issuance of algorithmic stablecoins and require bank-like regulation and reserves for systemic stablecoin issuers.”
Fitch also points out that stablecoins, backed by reserve assets with a fiat currency value, could clearly face a fundamentally different set of credit problems. This is quite different from algorithmic stablecoins.
“In such a case, the stability risk of stablecoins can be more manageable, depending on various factors, particularly the security and liquidity of the reserve assets,” the institute added.
“Other factors relevant to the credit profile of the issuer of a reserve-backed stablecoin include regulatory risk, counterparty risk (including custodians of the reserve), transparency over reserves and the degree to which the underlying assets are completely uncorrelated, the legal rights of stablecoin holders, and governance and financial risks. operational.”
The stablecoin itself is currently in the spotlight as the price of Terra LUNA continues to decline. In the last month Terra LUNA has lost a market capitalization of US$ 39.65 billion or equivalent to Rp. 574.93 trillion (assuming an exchange rate of Rp. 14,500/US$).
(vap/vap)
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