Lelieveldt: “The difference with other cryptocurrencies is that stablecoins always have a publisher, so there is someone who markets it. Not Bitcoin, which is created through a technical process.” In terms of publishers, you can think of investment companies, but also governments and even tech platforms. For example, Facebook wanted stablecoin Libra – later renamed Diem – to put into the market.
What’s going on now?
In October, the combined market value of the largest dollar-pegged stablecoins was more than $127 billion. An increase of almost 500 percent compared to the previous twelve months. So these coins are playing an increasingly important role, but they are not regulated until now.
Brosens: “For example, the company behind one of the oldest and largest stablecoins – Tether has already been fined twice this year for not being honest about the funding ratio in the past: for every dollar of stablecoin they issued, it turned out that they did not have a full owned ‘real’ dollars.”
There are also stablecoin issuers that do it more neatly, says the crypto follower at ING, such as USD Coin. “It has to be, because the promise of a stablecoin is that it is just as good as a real dollar. And if you want to sell it as an investor and get a ‘real’ dollar in return, then that should be possible.”
Are the concerns justified?
Stablecoins are a worldwide phenomenon, but the big players are in the US or have their currency pegged to the dollar. And that is where the biggest concerns lie, says Lelieveldt.
The biggest risk, experts say, is that there will come a day when investors will doubt whether the stablecoin they own is really worth the dollar the issuer says it is. If they want their money back en masse, you get a bank run: queues for the ATM, but digitally.
“That creates enormous pressure for the publisher who has to cough up the money. If that money is secured in all kinds of companies that are registered on islands in the Atlantic Ocean, such as with Tether, then that becomes a problem. Investors can then suffer significant losses.” , says Brosens.
This can also radiate to financial markets. “A crisis is always unexpected. If investors don’t get their money back and they try to sell stablecoins among themselves at rock bottom prices, the prices of shares in other markets can also plunge and that can lead to widespread panic,” says Brosens.
What about in the Netherlands?
Stablecoins, like other cryptos, are also not regulated in the Netherlands. That is why European regulations are being drawn up that will require at least part of the crypto market to come under supervision from 2023.
According to the AFM (Financial Markets Authority), this is also necessary, because investments in cryptos – including stablecoins – are risky. “We have been pointing out the risks of cryptos and crypto-derived products for some time now. Until there is regulation, we point out to consumers and investors that they themselves bear a responsibility in this.”
De Nederlandsche Bank (DNB) says that stablecoins could be a means of payment, provided that risks in areas such as money laundering and tax evasion are counteracted by the provider of the stablecoin. “These are risks because the cryptos lend themselves to illegal use due to accessibility and anonymity.”
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