Eric Rosengren is the head of the Boston FED. He is talking about the tether coin and similar “stable coins”. This as a potential risk factor for general financial stability. If you are into cryptocurrencies, click here and register an account so you can start trading crypto today.
What is Tether coin?
Tether coin is currently the third most popular and valuable cryptocurrency today. By its nature, the tether is similar to the dollar’s value. From this position stems its popularity. Mainly because the path of many investors into the world of cryptocurrencies first leads through the tether.
The main risk of the tether is its “alleged” connection with the dollar. The market is increasingly concerned that this merger is or may only be “paper”. Also that the underlying dollar fully will not cover all tethers.
According to tether, which protects the cryptocurrency of the same name, only 2.9% of ropes are currently covered by cash. The rest is covered only by commercial paper, which is a form of primarily unsecured short-term liabilities.
This with about $60 billion in total market capitalization of the tether of around $60 billion. It would mean that management Tether has more deposits than many US banks. Also, that it ranks 10th in the global commercial paper rankings.
In this respect, we can compare Tether coin to, for example, traditional monetary funds. Still, the essential difference is that the cryptocurrency is not subject to essentially any regulation. Unlike the mentioned funds, where the principle is, on the contrary, very significant.
According to some experts, this is a very high risk. A possible loss of confidence in the coverage of the cryptocurrency may cause a very considerable liquidity shock. This for the entire cryptocurrency sector. Therefore, for the broader financial industry as well.