The Federal Reserve research stablecoins reported that dollar-pegged stablecoins exhibit “safe asset qualities” in comparison to other crypto assets. The price rises above its peak during market distress events occasionally when other crypto assets drop, leading to more issuance compared to other virtual assets that dive. When prices of crypto like Bitcoin drop, stablecoin is the next subsequent choice of traders.
The US Federal has now made attention to the risk associated with the stablecoin market in a financial stability report issued on May 9. The Fed on Stablecoins along with money market funds and bonds are considered areas of risk in the current financial system, specifically funding.
The report is intended to promote public understanding of Stablecoins and provide more transparency and accountability for the federal reserve’s view. Also, summarizes the Federal Reserve’s framework for assessing the resilience of the U.S financial system and the board’s current assessment.
The Fed’s report says that “some MMFs, Money market Funds, and Stablecoins are flat to run.” Funding risks at domestic banks are low, whereas structural risks persist at some MMF’s bond funds, and Stbalecoins says Fed.
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TerraUSD (UST), one of the largest stablecoins and the largest algorithmic stablecoin by total supply, is finding it hard to maintain its spike against the US dollar which is a broad sell-off in crypto markets and global equities.
The Research made by Federal reserves on the risks associated with stablecoin and the benefits of stablecoin is in prominence in the policymaking world. especially after the President’s Working Group’s report for calling its new legislation to limit the stablecoin risks in November.
The Financial Stability Oversight Board may further step in to look after stablecoins, if Congress fails to make new laws to address stablecoins.