Stablecoin Report: Greater Risks Posed by Stablecoins Using Only Fractional Reserves or Higher-Risk Asset Allocations
July 4, 2021 @ 6:49 pm By Omar Faridi
The dramatic growth of stablecoin issuance may eventually have implications for the overall functioning of short-term credit markets, according to
Fitch Ratings.
Fitch Ratings notes in a recent update that potential asset contagion risks “linked to the liquidation of stablecoin reserve holdings” might increase pressure for stricter or tighter regulation of the emerging sector.
Contagion risks are mainly associated with collateralised stablecoins, and may vary based on the size, liquidity and riskiness of their asset holdings, as well as “the transparency and governance of the operator, among other things,” the Fitch Ratings team noted.
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