If THE cryptocurrencies stir up fears for their volatility, stablecoins do not suffer from any major sloshing, it is said. The latter would indeed benefit from a certain degree of stability since they are backed by its asset reserves such as fiat currencies (euro, dollar, etc.), commodities or other electronic currencies. John Reed Stark, a former employee of the SEC of the United States, makes us revelations around this so-called stable currency.
Stablecoins, “ neither stable nor coins »
John Reed Stark, the man who is skeptical of the endorsement of Spot Bitcoin ETFs in the Gensler era, has struck again. This time, he takes an in-depth look at stablecoins.
” Stablecoins are not neither stable nor coins ; it’s an empty, toxic cocktail of Monopoly money, Chuck E. Cheese chips, and casino chips, mixed together to create a Long Island Iced Tea of global financial risk. »
How can he make such criticisms when a stablecoin is supposed to be an alternative to volatile cryptocurrencies ?
Explanations:
” Stablecoins start fromconvoluted, inefficient and outdated technology, then inject into the mix a series of mysterious and dodgy profiteers with obvious conflicts of interest “.
With the series of depeg known by some stablecoins, John Reed Stark could be right in pointing out the inefficiency of these currencies. Haven’t we seen this with Terra USD (UST)? And recently Tether USD (USDT)?
Moreover, the ” conflicts of interest » have often caused liquidity problems to notorious projects like USDT. The TerraForm fiasco was reportedly triggered by similar conditions.
” Along the same lines, the crypto ecosystem is incestuous, highly concentrated and extremely secretive and uses its own stablecoins to provide the critical link between crypto exchanges and lending services. “, he continued.
Added to this is thelack of clear regulations about stablecoins
” But with stablecoins, the risk is almost impossible to quantify. For what ? Because there is no traditional US regulatory oversight, consumer protection, net capital requirements, review, inspection, audit, insurance, authorization to practice for individuals, and anything that the SEC or U.S. banking regulations impose and require “says John Stark.
Case of TrueUSD (TUSD)
In his lengthy presentation, Mr. Stark referred to the TrueUSD stablecoin whose The Wall Street Journal granted an article yesterday. The TUSD, which was born in March 2018 under the impetus of Techteryx, surprised lately for his performances.
Despite a temporary depeg last June, this dollar pegged stablecoin gradually gained popularity. Its frequent bullish rallies have not escaped the radar of the crypto community. Our colleague, who called stablecoins “ ticking time bombs for the crypto industry highlighted a 19% increase in TrueUSD trading volume.
Only problem, we don’t really know the real promoters of this once unknown project. John R. Stark didn’t forget to mention it in his tweet.
” It is therefore not surprising that no one knows exactly who controls TrueUSD, one of the fastest growing stablecoins. Its market value has more than doubled to around $3 billion since March, making it the fifth-largest stablecoin, while its share of stablecoin volume on cryptocurrency exchanges has soared to 20%. , compared to less than 1% at the start of the year. »
Stablecoins, what disadvantages?
Apart from conflicts of interest, inefficiency and mysteries, stablecoins also come with all a list of negative impacts.
John Reed Stark cited a few:
- strong blockchain transactions environmental impacts ;
- proliferation of ransomware attacksdrug trafficking, circumvention of sanctions, terrorist acts, murders on behalf of others, etc. causing very significant societal costs;
- and risk offinancial instability related to the development of stablecoins.
However, the world today is experiencing a mass arrival of stablecoins. At this pace, and with the unwavering support of some lawmakers, even GAFAM and similar companies could afford their own stablecoins.
Didn’t PayPal wake American elected officials from their sleep with the launch of its stablecoin PYSD? For US Congress speaker McCarthy, the time has come for the establishment of clear regulations for the crypto industry.
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