The United States’ central bank, the Federal Reserve, said in a presentation that it is concerned about the extreme growth stablecoins like Tether (USDT) are experiencing. The largest and best-known stablecoin, Tether, already has more than $60 billion in coins in circulation. Because the Federal Reserve holds a lot of power, crypto investors are wary.
‘Short-term disruptor’
The President of the Federal Reserve in Boston, Eric Rosengren, announced in a presentation that the umbrella financial body closely monitors the developments of stablecoins.
In the presentation, Rosengren talks about three possible problems that could affect the stability of financial markets in the short term. For example, the housing market, the capacity to borrow money during a crisis and ‘short-term disruptors’ were mentioned.
Rosengren cites stablecoins as one of those potential short-term disruptors to the stability of financial markets.
“The reason we should be concerned about stablecoins is that they are growing extremely fast. So there is exponential growth. […] I think it’s important to have a broad perspective on what things can disrupt credit markets in the short term and stablecoins are definitely a part of this.”
Not the first time alarm bells have sounded
Avanti Financial Group CEO Caitlin Long saw this statement by the US Federal Reserve as groundbreaking news. She herself warned for some time about the potential dangers of the stablecoin market.
1/ HOLY COW–the Fed today, for the first time, explicitly called out tether–by name–as a risk to financial stability (namely, to short-term credit markets.) Here it is, in the Fed’s own words & charts:https://t.co/XrsGre2A4j pic.twitter.com/jtOyhctEU8
— Caitlin Long ???? (@CaitlinLong_) June 25, 2021
Tether has also often been negatively in the news. A few months ago, the US government investigated whether Tether had enough in-house support for the large amount of USDT coins in circulation. At the time, the case ended in a settlement.
However, according to Caitlin Long, the fact that the Federal Reserve is now calling Tether by name is a big change. Because Tether is linked to the US dollar and every dollar falls under the jurisdiction of the Federal Reserve, this body can have a significant finger in the pie with any regulation of such stablecoins.
A while back, the Tether fear, uncertainty and doubt (FUD) is over, but the Federal Reserve’s presentation seems to be reviving this sentiment. What the central bank’s next steps would be remains to be seen.
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