The U.S Treasury Department’s Financial Stability Oversight Council (FSOC) says the role of stablecoins as a bridge between the digital asset market and the broader financial system warrants continued attention.
In its 2024 annual report, the FSOC says that stablecoins – commodity or currency-pegged cryptocurrencies – do not have adequate safeguards against risks and failures.
[adinserter block="1"]“As the Council has stated over the last several years, stablecoins continue to represent a potential risk to financial stability because they are acutely vulnerable to runs absent appropriate risk management standards.”
The FSOC says the lack of precautionary measures becomes more concerning because more than half of the stablecoin sector’s total market value is held by a single firm: USDT issuer Tether.
USDT’s total market cap is approximately $138 billion, representing around 70% of the global stablecoin market, according to FSOC.
“Given that firm’s market dominance, if it continues to grow, its failure could disrupt the crypto-asset market and create knock-on effects for the traditional financial system.”
The council says many stablecoin issuers are also operating outside of the prudential regulatory framework, which increases the risk of fraud.
“Although a few are subject to state-level supervision requiring regular reporting, many provide limited verifiable information about their holdings and reserve management practices.”
Amid the continued growth of the crypto market, the FSOC urges legislators to enact laws to mitigate risks related to stablecoins.
“The Council recommends that Congress pass legislation creating a comprehensive federal prudential framework for stablecoin issuers to address run risk, payment system risks, market integrity, and investor and consumer protections, including for entities that perform services critical to the functioning of the stablecoin arrangement.”
Read the full report here.
Follow us on X, Facebook and Telegram
Don't Miss a Beat – Subscribe to get email alerts delivered directly to your inbox
Surf The Daily Hodl Mix
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any assets including cryptocurrencies, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Featured Image: Shutterstock/Teo Tarras/Natalia Siiatovskaia
