Stablecoins less risky than bank deposits

July 28, 2023

Dear Reader,

Fresh off the presses…

Ex-fed policy analyst goes on record.

Says that stablecoins pose a lower risk than bank deposits and money market funds.

Let's take a closer peek under the hood, shall we?

Stablecoins were designed to keep a stable value relative to a fiat currency.

Former Federal Reserve Board analyst Brendan Malone argues that stablecoins are less risky because their reserves are backed by short-dated Treasuries.

These reserves are also kept separate from the issuer's assets.

Money market funds invest in short-term assets.

Here's the kicker…

Banks accept short-term deposits and use them to offer long-term loans.

Those loans are not repaid for years.

This creates a continuous risk for banks and permanent risk for management.

Stablecoins are used as a way to make transactions happen.

They are not an investment option per se.

And they are certainly not a "cash management vehicle."

The point is that, as risky as crypto has been characterized, certain crypto-based investments are even better than those available through the legacy banking system.

Cointelegraph Markets Pro also offers a safer alternative to serious investors and traders.

Regards,

Russell DeCorte
Director
Markets Pro