Stablecoin risks and how to overcome them

Disclosure: The views and opinions expressed here belong solely to the author and do not represent the views and opinions of crypto.news’ editorial.

Given the rise in interest towards central bank digital currencies, their usage will continue to increase. This is despite the recent turmoil about the recent depegging of USDC or, much worse, the collapse of the TerraUSD (UST) stablecoin and its sister cryptocurrency LUNA.

But with all this attention, it becomes increasingly important to understand what kind of risks you might face using CBDCs.

Stablecoins are digital currencies designed to maintain a stable value relative to a traditional currency, commodity, or other asset. It is their stability that makes them attractive for a number of use cases in the likes of facilitating cross-border transactions, serving as a store of value, and even enabling decentralized finance (DeFi) applications.

Overall, stablecoins were created with one big goal in mind – to address the high price fluctuations of native cryptocurrencies such as bitcoin (BTC) and ethereum (ETH). And while bitcoin’s volatility is great for traders who can use the cryptocurrency as an investment, it makes it much harder to use it as a payment method, thus also further slowing the wider adoption of blockchain technology.

This is where stablecoins come into play, as their close links to fiat currency help them maintain a more stable value, allowing them to act as a means of payment. In addition, stablecoins can be sent and received much quicker and are inexpensive, regardless of borders and jurisdiction, and without the need for intermediaries like banks.

Furthermore, the development of stablecoins has increased significantly in recent years, with major players such as tether (USDT), the USD coin, and dai becoming increasingly prominent in the cryptocurrency market. The total market capitalization of stablecoins has grown rapidly over the past few years, reaching over $130 billion as of the time of writing. Moreover, with the Federal Reserve still mulling over the creation of a central bank digital currency ( Go to Source to See Full Article
Author: Guest Post

Did you like this?
Tip BTC Newswire with Cryptocurrency