Eswar Prasad, an economics professor at Cornell, has warned about the damage that a bank run on a possible collapse of a big stablecoin might bring to the traditional finance system in the U.S.
Cornell Professor Warns of Disruption to US Bond Market From Potential Collapse of Major Stablecoin
A professor from Cornell University has warned about the potential effects a collapse of a major stablecoin could have on the U.S. bond market. Eswar Prasad said that if large stablecoins face a collapse, the number of Treasury bonds they would need to sell could disrupt the U.S. Treasuries market, affecting prices.
According to their report, all of the top three stablecoins possess a big number of U.S bonds in their treasuries. According to reports issued in November, the issuers of Circle, Tether, and Paxos, issuers of the top three stablecoins in the crypto market, would possess close to $60 billion in U.S. treasury bonds.While a clear regulatory framework for stablecoins in the U.S. has not yet been established to address potential problems from their collapse, regulation may be on the horizon.
the “Stablecoin Transparency of Reserves and Uniform Safe Transactions Act of 2022,” also known as the TRUST Act, with the goal of regulating stablecoin operations without hindering innovation.the “first ever” Digital Assets, Financial Technology and Inclusion subcommittee, with the intention of providing clear rules for the digital cryptocurrency ecosystem, that might also include stablecoins in the future.
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