ECB Warns of Stablecoin Risks, U.S. Adopts New Law

The European Central Bank warns of potential risks from stablecoins, digital currencies designed to maintain a steady value. The market for these tokens has surged due to increased investor interest and new regulations, but this growth could pose problems for the financial system. The main concern is that a loss of trust in stablecoins ability to be exchanged for traditional money could trigger a sudden sell-off, leading to a de-pegging event and potentially disrupting the crypto market and even the broader economy. Major stablecoins like Tethers USDT and Circles USDC, which hold U.S. Treasury bills, could face a run, forcing quick asset sales and disrupting U.S. Treasury markets. Despite these warnings, the ECB notes that direct financial risks to the euro area are currently limited, but emphasizes the need for close monitoring due to the rapid growth of stablecoins. The ECB is also developing its own digital currency, contrasting with former U.S. President Trumps stance against central bank digital currencies.The Daily News Now! — Every city. Every story. AI-powered. Hosted on Acast. See acast.com/privacy for more information.