NEW
YORK, June 17, 2022 /PRNewswire/ -- (S&P
Global Ratings) -- Decentralized finance (DeFi) needs digital
currencies that can dependably act as a bridge with the world of
traditional finance to become mainstream, said an article published
today by S&P Global. In "Stablecoins: Common Promises,
Diverging Outcomes," the authors discuss how
stablecoins--cryptocurrencies with a market value generally tied to
a specific fiat currency--have emerged to fulfill that role.
The recent market rout has demonstrated that not all stablecoins
are equal and contain idiosyncratic risks, where certain
algorithmic types are less likely to maintain their promised
stability. Stablecoins will ultimately compete with central bank
digital currencies (CBDCs) or tokenized deposits of commercial
banks from the traditional finance world.
Spurred by recent market turbulence, stablecoins are attracting
increasing regulatory scrutiny and constitute arguably the hottest
regulatory topic in the crypto world at the moment. This is no
surprise. The implications will only grow with volumes issued.
These are multifaceted--from traditional anti-money laundering
issues to potential financial stability considerations, such as a
run on a stablecoin leading to a fire sale of assets held as
reserves.
The currency policy stance towards stablecoins varies across
jurisdictions. In China, for
instance, stablecoins and other cryptocurrencies are banned
outright so that the focus is on the launch of a central
bank-backed e-CNY. In the U.S., discussions are progressing on how
to regulate stablecoins; so far, over 95% of outstanding coins are
linked to the U.S. dollar. The U.K. government has also made it a
priority to legislate in this area to foster the country's future
role as a crypto-hub. Japan is
allowing banks and other registered financial services entities to
issue stablecoins from next year.
The report looks into many of the implications around
stablecoins and potential competitors from the traditional finance
world, how they work, the roles they play, and the risks they
pose.
This report does not constitute a rating action.
Media Contact:
Jeff Sexton, New York
+1 (917) 596-3417
jeff.sexton@spglobal.com
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SOURCE S&P Global