The chairman of the Boston Federal Reserve, Eric Rosengren, discussed stablecoins in a recent speech on June 25. Rosengren emphasized that stablecoins may be the “disruptors” of major money market funds. The chairman of the Boston Federal Reserve said that the exponential growth of stablecoins is worrying.
Rosengren: “We should be a little worried about the rapid growth of the stablecoin market”
Fed members are very aware of stablecoins and the huge market created by these linked assets. Today’s statistics show that in a long list of these types of tokens, the total stablecoin capital is $111 billion.
Of all this money, on Sunday, June 27, among the $96 billion in cryptocurrency swaps recorded globally, the reported stablecoin trading volume was $63 billion. Eric Rosengren, chairman of the Boston Federal Reserve Bank, has noticed this growth, and the banker believes it may cause problems for short-term currency markets.
In a speech entitled “Financial Stability”, Rosengren emphasized that the stablecoin market is “a cyclical disturbance to the short-term credit market.” The chairman of the Boston Federal Reserve further discussed inflation and the US real estate market.
Rosengren and Yahoo Finance reporter Brian Cheung discussed the topic of stablecoins and mentioned Tether (USDT). After the speech, Zhang asked the chairman of the Boston Federal Reserve Bank: “Considering its historical role as a backing, isn’t the financial stability risk of a stable currency like Tether as big as the Fed allows?”
“I’m talking about Tether and [stablecoins] Yes, if you look at their portfolio, it basically looks like a portfolio of high-quality money market funds, but it may be riskier,” Rosengren answered Zhang’s question. “Actually, we had A stablecoin encountered financial difficulties. As you emphasized, Tether owns many assets, and during the pandemic, the spread of these assets is very large. The Fed intervened to ensure that the short-term credit market continues to function,” Rosengren added. The chairman of the Boston Federal Reserve continued:
We should be a little worried about the reasons for stablecoins [markets] Because it is growing very rapidly, stablecoins are growing exponentially. As people look for a less risky way to hold trading accounts, major money market funds have been slowly falling, and many of them have turned to government money market funds.
Rosengren emphasized the need to start thinking carefully about what happens to things like stablecoins
Rosengren said that central banks and regulators need to “think more broadly” about what types of things might disrupt the short-term credit market. “Of course, stablecoins are an element,” said the chairman of the Boston Federal Reserve Bank.
Cheung further asked: “If these markets do experience pressure and the Fed will support these markets, will these types of products not have such a large financial stability risk? Rosengren replied that he thinks regulations should be more frequent Change, so officials don’t have to go back to this kind of thing every ten years.
Rosengren emphasized: “I do worry that as the stablecoin market develops and becomes a more important sector of our economy, it is currently almost unregulated.” “We need to take it seriously when people use these types very quickly. What happens when the instrument is installed,” he added. Rosengren further said:
Just as money market funds cause severe disturbance to the credit market, I think that if we don’t start to carefully consider what happens to stablecoins the next time we encounter terrible market difficulties, then future financial stability problems may occur. .
Tether (USDT) is the largest stablecoin to date, valued at US$62 billion. Behind Tether is the U.S. dollar coin (USDC), a stable currency issued and maintained by the Circle company. The market value of USDC is 25.8 billion U.S. dollars. In the sum of USDT and USDC, these two stable currencies account for 79% of the entire $111 billion stable currency market value.
What do you think of Rosengren’s statement on Tether and stablecoins? Please tell us your thoughts on this topic in the comments section below.
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