Stellar Lumens (XLM) Forum with for newcomers and contributor's rewarded Check here




Stablecoin Runs the Risk of Gridlock & Negative Yields: JPMorgan Chase
  • 2 Vote(s) - 3.5 Average
  • 1
  • 2
  • 3
  • 4
  • 5

#1
[Image: Life-Without-Dollars-A-New-Lasting-Stabl...orever.jpg]
Stablecoin Runs the Risk of Gridlock & Negative Yields: JPMorgan Chase

  • Everyone is jumping on the stablecoin bandwagon
  • Potential to grow substantially but serious macroeconomic consequences
  • Negative yields another risk facing stablecoins
  • Stablecoins are all the rage in 2019.
The fast-growing fiat currency backed digital currencies, that are designed to mitigate the large fluctuations of cryptocurrencies, could fail to work properly in the period of stress, as per JPMorgan Chase & Co.


Jumping on the Stablecoin Bandwagon

The largest US bank created its own stablecoin, JPM Coin earlier this year, which is “designed to make instantaneous payments using blockchain technology.”

Another bigwig in this game is social media giant Facebook whose Libra is facing criticism from the authorities from all over the world.

Recently, the leading crypto exchange Binance also jumped on the stablecoin bandwagon with the launch of its dollar-backed stablecoin in the US and received New York Department of Financial Services (NYDFS) for the same as well.

The growing competition in the stablecoin market has started to hurt other stablecoins.

Tether (USDT) remains the most popular one still, with USDC (Coinbase’s stablecoin) gradually growing with PAX/TUSD flippening.

DAI, however, is the victim of ether recession with GUSD (Gemini Dollar) in trouble as well, as per Skew Markets data.
Potential to grow substantially but serious macroeconomic consequences

As can be seen, despite the combined value of stablecoins in the cryptocurrency market being less than $5 billion, the low-volatility tokens are poised for rapid growth.

However, they are still vulnerable to seizures and bottleneck as they lack the short-term liquidity facilities present in other payments systems, reported the analysts.

This means, there is a risk that activity in these coins will grow faster than they can actually manage.

“Stablecoins, and Libra in particular, have the potential to grow substantially and ultimately shoulder a significant fraction of global transactional activity,” the analysts said on Thursday.

Quote:
“However, as currently designed and proposed, they do not take into account the microstructure of operating such a payment system. The risk of payment system gridlock, particularly during periods of stress, could have serious macroeconomic consequences.”


Negative yields another risk in front of stablecoins

Another danger facing these stablecoins is negative yields.

“Any system that relies on reserve-asset income to fund operational and other ongoing costs becomes unstable in a negative yield world,” said the analysts.

Being fiat-backed Libra and other stablecoins rely on income from the collateral in the reserve account to pay for maintaining the network and rewarding association members.

Quote:
“With more than half of high-quality short-term sovereign debt already negative, the vast majority of the remainder made up of U.S. government securities, and trends pointing towards global monetary easing, a fully negative yielding Libra reserve has become a plausible (some would argue likely) risk.”




by AnTy
Reply


Possibly Related Threads...
Thread Author Replies Views Last Post
  BITCOIN LOOKS ATTRACTIVE AS NEGATIVE-YIELDING DEBT CROSSES $17 TRILLION crytocure 0 60 02-09-2019, 01:42 AM
Last Post: crytocure
  Customers Can Sue Chase For Hidden Crypto Fees, Court Rules crytocure 0 91 04-08-2019, 03:18 PM
Last Post: crytocure
  As Fears of Negative Interest Rates Rise, This is How Bitcoin is Compounding Growth crytocure 0 184 29-07-2019, 03:26 PM
Last Post: crytocure
  Decentralizing the Stablecoin Market: Equilibrium crytocure 0 95 07-07-2019, 01:18 PM
Last Post: crytocure
  Savvy Crypto Hacker Runs Bitcoin Core on Nintendo Switch crytocure 0 160 05-06-2019, 03:25 PM
Last Post: crytocure
  Stablecoin 101 - All There Is To Know About The Trend crytocure 0 139 03-03-2019, 03:05 PM
Last Post: crytocure
  What is cryptocurrency-backed stablecoin? crytocure 0 188 25-02-2019, 02:03 PM
Last Post: crytocure
  JPMorgan: Blockchain Adoption is Real crytocure 0 197 30-01-2019, 02:39 AM
Last Post: crytocure
  What is a stablecoin and how does it work? A guide to fiat-pegged cryptocurrencies crytocure 0 259 29-01-2019, 02:52 PM
Last Post: crytocure
  Basis: A New Algorithmic Stablecoin crytocure 0 124 03-12-2018, 06:35 AM
Last Post: crytocure



Users browsing this thread: 1 Guest(s)