Home Markets Stablecoins need to be tethered by real-world rules

Stablecoins need to be tethered by real-world rules


When America’s oldest money-market fund “broke the buck” in 2008, it was a key moment of the financial crisis. The Reserve Primary Fund had to break its promise to return $1 for every share to its investors in the wake of Lehman Brothers’ landmark bankruptcy. Retail investors soon found out that banklike stability pledged by such funds did not mean banklike protection. Stricter regulations as to what money-market funds could invest in ensued. Something just as existential may be happening in the $1.3tn crypto market.

Tether, the cryptosphere’s biggest stablecoin, last week briefly broke its one-to-one link with the US dollar. Unlike Bitcoin or other more esoteric crypto assets, stablecoins are meant to avoid volatility, as their name suggests. They claim to be underpinned by real-world assets and so act as a vital cog to the crypto market, providing traders with a safe place to park their cash between making bets on more volatile…

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