As cryptocurrency (virtual currency) trading is activated, the market capitalization of so-called stable coins (coins with little price fluctuation) have exceeded 100 billion dollars (113 trillion), and if this market shakes, it is the starting point of a financial crisis caused by cryptocurrencies. This could be the case, Bloomberg reported on the 17th.
A stablecoin is a cryptocurrency designed to minimize price volatility, and is usually designed so that 1 coin is worth 1 dollar. That is, 1 dollar is pegged to 1 coin.
Tether (USDT) is a representative stablecoin, and there are other stablecoins such as HUSD, PAX, GUSD, and USDC.
Recently, as cryptocurrency trading has exploded, stablecoin trading has also been activated, and the total stablecoin market cap has exceeded 100 billion dollars.
In particular, Tether is a popular stablecoin with a market capitalization of $62.5 billion, ranking as the third largest cryptocurrency by market capitalization.
In particular, the reason Tether ranks third in terms of market capitalization is because cryptocurrency trading begins through Tether.
Currently, cryptocurrency investors are investing in cryptocurrency after saving money in the bank account that opened the stablecoin. Buying other cryptocurrencies with stablecoins that do not change in price. In other words, the stablecoin holding account is acting as a cryptocurrency wallet.
As such, Tether is not just a cryptocurrency, but a portal (gateway) that helps cryptocurrency transactions.
If something goes wrong with such a cryptocurrency, a crisis can be transmitted to the entire cryptocurrency market.
Companies that issue stablecoins, such as Tether, guarantee payment. However, it is questionable whether these companies are holding such reserves. Since the stablecoin market cap has crossed $100 billion, the company must have $100 billion in cash. That way, whenever a customer asks for a payment, it can be paid in dollars.
However, it is unlikely that these companies will have $100 billion in cash. In fact, when financial authorities in the United States investigated whether Tether had sufficient reserves, it was found that it was not.
If Tether investors demand to exchange for dollars all at once, there is a risk of insolvency. If Tether goes into insolvency, the crisis will inevitably spread to other crypto markets as many people have bought other cryptocurrencies with Tether.
In addition, this market can become a hotbed of illegal funds. As the market cap of stablecoins crossed the $100 billion mark, a market of $100 billion worth of money was exchanged bypassing the U.S. banking system. However, this market is out of reach of US regulators.
Accordingly, global criminal groups are using the stablecoin market to conduct money laundering and various illegal financial activities.
For this reason, Bloomberg predicted that if there is a financial crisis caused by cryptocurrencies, it is likely to start with stable coins such as Tether.
