Stablecoins

Why in the News?

Recently, the Financial Stability Board (FSB), promised to push for stablecoin regulation, citing “recent turmoil” in the cryptocurrency market.

• FSB is a body which advises major economies on international finance.

Key Points: About Stable Coins

• A stablecoin is a digital currency whose value is pegged to a ‘stable’ asset, such as the U.S. dollar or gold.
  • For Example, Tether (USDT)
• They are not authorised for use by a country’s lawmakers or central bank.
  • That means investors take on considerable legal and financial risk to hold them.
• Stablecoins are only as stable as their investors faith in the them.
• They are more useful than more volatile cryptocurrencies as a medium of exchange.
• These may be pegged to a currency like the U.S. dollar or to the price of a commodity such as gold.
• In countries like Turkey where the local currency is rapidly losing value, converting funds to stablecoins is one way for residents to safeguard their earnings.