The Bank for International Settlements (BIS) is an international organization that represents central banks around the world. On July 20, 2023, it published a report on stablecoins. The latter seriously questions the reliability of these crypto currencies backed by a classic currency like the dollar and the euro.
Stablecoin is not a reliable means of payment
Recently, we have seen a lot of enthusiasm for stablecoins. Opinions also differ on the value of this crypto. For example, the USA recognizes it like a currency. According to the BIS report, the reality is quite different.
The BIS studied 68 stablecoins. According to his conclusions, no stablecoin can remain pegged to a fixed value at any time. The fact is that this crypto is often supported by volatile assets (including bonds or crypto currencies). She therefore remains vulnerable to market fluctuations.
For example, Tether (USDT) is among the most popular stablecoins. It is supposed to be pegged to the US dollar. In May 2022, however, this crypto lost its parity with the dollar. It traded at a lower price for several days.
“In addition to not being stable, a crypto stablecoin is also not reliable”, declares the BIS. The reason is simple: it is often issued by private companies which are not subject to the same regulations as traditional banks.
What consequences for the crypto market?
When a stablecoin loses its parity with the currency to which it is pegged, its users lose value.
The instability of stablecoins can also undermine confidence in cryptocurrencies. Enough to affect crypto adoption as a means of payment or as a source of safe value.
In any case, the BIS report is a blow to the crypto industry and the stablecoin market.
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