{"id":16507,"date":"2023-01-16T11:57:51","date_gmt":"2023-01-16T11:57:51","guid":{"rendered":"https:\/\/crowdfundjunction.com\/blog\/cornell-professor-warns-of-disruption-to-us-bond-market-from-potential-collapse-of-major-stablecoin-economics-bitcoin-news\/"},"modified":"2023-01-16T11:57:51","modified_gmt":"2023-01-16T11:57:51","slug":"cornell-professor-warns-of-disruption-to-us-bond-market-from-potential-collapse-of-major-stablecoin-economics-bitcoin-news","status":"publish","type":"post","link":"https:\/\/crowdfundjunction.com\/blog\/cornell-professor-warns-of-disruption-to-us-bond-market-from-potential-collapse-of-major-stablecoin-economics-bitcoin-news\/","title":{"rendered":"Cornell Professor Warns of Disruption to US Bond Market From Potential Collapse of Major Stablecoin \u2013 Economics Bitcoin News"},"content":{"rendered":"

(Originally posted on : Bitcoin News )<\/b>
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A professor from Cornell University has warned about the potential effects a collapse of a major stablecoin could have on the U.S. bond market. Eswar Prasad said that if large stablecoins face a collapse, the number of Treasury bonds they would need to sell could disrupt the U.S. Treasuries market, affecting prices.<\/strong><\/p>\n

Cornell Profesor Alerts About Stablecoin Collapse Danger<\/h2>\n

Eswar Prasad, an economics professor at Cornell University, has warned about the potential damage a bank run on a possible collapse of a major stablecoin could bring to the traditional finance system in the U.S. Although the most recent collapse in the crypto economy did not reach legacy finance structures, Prasad believes stablecoins and their operations present risks in this regard.<\/p>\n

In an interview with CNBC, Prasad argued<\/a> that stablecoins use U.S. treasuries as a backup to maintain the value of the peg. In the case that one of the big stablecoins in the market faces a collapse or a bank run, these organizations would have to redeem these bonds to process their own redemptions, affecting the treasuries market.<\/p>\n

Prasad stated:<\/p>\n

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A large volume of redemptions even in a fairly liquid market can create turmoil in the underlying securities market. And given how important the Treasury securities market is to the broader financial system in the U.S. I think regulators are rightly concerned.<\/p>\n<\/blockquote>\n

According to their report, all of the top three stablecoins possess a big number of U.S bonds in their treasuries. According to reports issued in November, the issuers of Circle, Tether, and Paxos, issuers of the top three stablecoins in the crypto market, would possess close to $60 billion in U.S. treasury bonds.<\/p>\n

Incoming Regulation<\/h2>\n

While a clear regulatory framework for stablecoins in the U.S. has not yet been established to address potential problems from their collapse, regulation may be on the horizon. In December, Republican Senator Pat Toomey introduced<\/a> the \u201cStablecoin Transparency of Reserves and Uniform Safe Transactions Act of 2022,\u201d also known as the TRUST Act, with the goal of regulating stablecoin operations without hindering innovation.<\/p>\n

Also, recently, the U.S. House Committee on Financial Services created<\/a> the \u201cfirst ever\u201d Digital Assets, Financial Technology and Inclusion subcommittee, with the intention of providing clear rules for the digital cryptocurrency ecosystem, that might also include stablecoins in the future.<\/p>\n

The stablecoin market was shaken in 2022, when a top-five algorithmic stablecoin, UST, collapsed<\/a> and went from a capitalization of roughly $10 billion in January to only $215 million in December.<\/p>\n

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\nTags in this story
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Circle<\/a>, cnbc<\/a>, cornell<\/a>, Eswar Prasad<\/a>, pat toomey<\/a>, Paxos<\/a>, Stablecoins<\/a>, Tether<\/a>, Treasuries<\/a>, TRUST stablecoin act<\/a>, us bonds<\/a>, USDC<\/a><\/div>\n<\/div>\n

What do you think about the concerns about the effect of a stablecoin bank run on the U.S. bond market? Tell us in the comments section below.<\/strong><\/em><\/p>\n

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\nSergio Goschenko <\/h6>\n

\nSergio is a cryptocurrency journalist based in Venezuela. He describes himself as late to the game, entering the cryptosphere when the price rise happened during December 2017. Having a computer engineering background, living in Venezuela, and being impacted by the cryptocurrency boom at a social level, he offers a different point of view about crypto success and how it helps the unbanked and underserved.<\/p>\n<\/div>\n<\/div>\n

Image Credits<\/b>: Shutterstock, Pixabay, Wiki Commons<\/em><\/p>\n

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Disclaimer<\/strong>: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com<\/a> does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.<\/p>\n<\/div>\n

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