At the Proof of Talk conference in Paris on June 10, during the panel discussion titled “Stablecoins: Programmable Money in a Digital World”, Diogo Monica, a general partner at Haun Ventures, stated that stablecoins may be safer than commercial bank deposits.
Monica said that many stablecoins are backed by reserves held at globally systemically important banks (G – SIBs) or in short – term US treasury bills, which he believes are more secure than commercial bank deposits. He pointed out that a deposit at a commercial bank is a liability for the bank, and if the bank fails and the depositor is not covered by depositor insurance, there may be consequences for the creditor. In contrast, a reliable stablecoin issuer is expected to rely on G – SIB deposits or short – term treasury bills, which are arguably safer. Put simply, stablecoins represent a title to top – tier collateral rather than a potentially shaky regional bank.
However, stablecoins and their issuers often introduce their own risks. Tether, the largest centralized stablecoin issuer by market cap, has faced repeated scrutiny over transparency and risk management. In late 2018, Crypto Capital, the payment processor of the Tether – tied cryptocurrency exchange Bitfinex, lost access to approximately $850 million worth of exchange assets, leading Tether to lend at least $625 million of its reserves to Bitfinex to keep the platform solvent, without disclosing this to the market. Despite publishing reserve attestations in recent years, Tether has yet to produce a full independent audit, raising concerns about its transparency.
Critics warn that although stablecoins may offer stronger collateralization in theory, their reliability depends heavily on the behavior of the issuing entity. The lack of transparency from issuers like Tether is a significant issue that could undermine the safety of stablecoins in practice.
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