Boston Fed President Says “Exponential Growth” Of Stablecoins Could “Disrupt” Money Markets – Economy Bitcoin News
Boston Federal Reserve President Eric Rosengren spoke about stablecoins in a recent June 25 presentation. Rosengren stressed that stablecoins could be a “disruption breaker” for world-class money market funds, and the Boston Fed President noted that the exponential growth of stablecoins is worrying.
Rosengren: “We should be a little worried that the stablecoin markets are growing very quickly”
Members of the Federal Reserve are well aware of the stablecoins and the massive market that these tied assets have created. Today statistics show that in the long list of these types of tokens, there is a stablecoin capitalization of $ 111 billion.
Of all that money, there is a reported stablecoin trading volume of $ 63 billion as of Sunday June 27th out of the $ 96 billion in crypto swaps recorded worldwide. Boston Fed President Eric Rosengren has noticed the growth and the banker believes it could pose a problem for short-term money markets.
During the presentation, titled “Financial Stability,” Rosengren highlighted the stablecoin markets as “a periodic disruption to short-term credit markets.” The President of the Boston Fed continued to talk about inflation and the US housing market.
Rosengren discussed the topic of stablecoins and mentioned Tether (USDT) with Yahoo Finance reporter Brian Cheung. After the presentation, Cheung asked the President of the Boston Fed, “Isn’t the risk to the financial stability of these stablecoins like Tether just as great as the risk the Fed allows given its historic role as a backstopper?”
“The reason I talked about Tether and [stablecoins] When you look at their portfolio, it basically looks like a top-tier money market fund portfolio, but it may be riskier, ”Rosengren replied to Cheung’s question. “We actually had a stablecoin that got into financial trouble last week. Tether, as you pointed out, has a number of assets that have become quite widespread during the pandemic. The Fed has intervened to ensure that short-term credit markets continue to function, ”added Rosengren. The President of the Boston Fed continued:
And the reason we should be a little worried about stablecoin [markets] is that it is growing very quickly, so there is exponential growth in stablecoins. Top notch money market funds are slowly declining as people looked for a less risky way to keep their transaction accounts, and many of them have switched to government money market funds.
Rosengren emphasizes the need to think carefully about what happens to things like stablecoins
Rosengren says the central bank and regulators need to “think ahead” which could unsettle short-term credit markets. “Stablecoins are certainly an element,” noted the Boston Fed President.
Cheung continued, “If the Fed were to hold these markets back when they were under stress, wouldn’t there be such a great risk to financial stability from these types of products? Rosengren replied that he thought the rules should be changed more frequently so that officials don’t have to come back to such matters every decade.
“I am concerned that the stablecoin market, which is currently quite unregulated, is growing and becoming a more important sector of our economy,” said Rosengren. “That we have to take seriously what happens when people run away from such instruments very quickly,” he added. Rosengren continued:
Just as the money market funds caused a bad disruption in the credit markets, I think a future financial stability problem could arise if we don’t think carefully about what happens to things like stablecoins the next time we have serious market trouble.
Tether (USDT) is by far the largest stablecoin in existence today, valued at $ 62 billion. Behind the tether is a usd coin (USDC), a stablecoin that is issued and managed by the Circle company. USDC has a capitalization of $ 25.8 billion and between USDT and USDC combined, the two stablecoins represent 79% of the total stablecoin market capitalization of $ 111 billion.
What do you think of Rosengren’s statements on tether and stablecoins? Let us know what you think on this matter in the comments below.
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