The instability in stablecoins unnerving regulators: Mike Dolan

The instability in stablecoins unnerving regulators: Mike Dolan

(The author is editor-at-large for finance and markets at Reuters News. Any views expressed here are his own) LONDON - Regulators are getting anxious about how mushrooming 'stablecoins' - mostly dollar-pegged crypto tokens - could sow instability in wider financial markets more directly than already hyper-volatile cryptocurrencies like Bitcoin. Western central banks and watchdogs have to date mostly stood aside from cryptocurrencies, emphasising transparency and a 'caveat emptor' approach to what they see as largely speculative vehicles rather than transaction currencies per se. The growing involvement of mainstream banks and asset managers pushes them up the radar screen, but harsher curbs don't seem imminent yet. But explosive issuance of stablecoins, which have grown 18 fold over the pandemic to more than $100 billion, is a different matter and has been setting off alarm bells all year. Stablecoins are essentially cryptocurrencies - verified on decentralized public ledgers or blockchains - but are designed to have a stable value relative to hard currencies or gold to avoid the sort of volatility that makes bitcoin and other tokens almost impossible for most commerce. While they operate independently of traditional banking systems, it's the assets they use to theoretically peg their value that loops