Reference no: EM133015414
Self created cryptocurrencies backed by the US Dollar (or US Dollar equivalents) are called stable coins. There are many of them from USDC, USDT, GUSD, BUSD, etc.... and there is an every mushrooming set of companies trying to create these stable coins. In fact if you peg your own crypto to the US Dollar, you would have stable coin. However, these stable coins off late have become subject to much controversy because of the ease of which one could engage with financial irregularities and direct transmissibility. Refer to the following news articles : https://www.washingtonpost.com/business/2021/09/21/sec-gensler-crypto-stablecoins/ (Links to an external site.) and https://www.bloomberg.com/news/articles/2021-09-11/stablecoins-face-crackdown-as-u-s-discusses-risk-council-review (Links to an external site.)
There are about 100-200 billion dollars worth of different stable coins today actively being consumed, used for transacting on exchanges and a whole variety of financial purposes. USDT alone has a marketcap close to 70 Billion USD.
a) What would you think are the risks of such stable coins?
b) Central Banks are themselves releasing stable coins globally - for example, China recently issued its own digital yuan on its national blockchain https://cointelegraph.com/news/how-the-digital-yuan-stablecoin-impacts-crypto-in-china-experts-answer (Links to an external site.)
In your opinion, would you think (b) would increase the risk to the global financial system
c) We also saw that San Salvador on September 7th adopted Bitcoin as legal tender. Why would you think Bitcoin as a cryptocurrency is more tenable than having their own stablecoin?
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