Moody’s rating agency analysts considerthat the recent decoupling of USD Coin (USDC) from the US dollar could hinder the development of stablecoins and lead to tighter regulation.
“So far, major fiat-backed stablecoins have shown amazing resilience, emerging unscathed from previous scandals such as the FTX crash,” Moody’s said.
The agency’s specialists also noted a significant increase in the capitalization of “stable coins” in recent years.
On March 11, USDC lost its peg to the US dollar after its co-issuer Circle announced that it was holding $3.3 billion in reserves at the Silicon Valley Bank (SVB), which was shut down by the authorities.
The company promised to cover “any shortfall” in backing the stablecoin. However, the USDC fully restored parity with the US dollar only after the US regulators announced the rescue of SVB depositors.
“Otherwise, USDC could have suffered a crash and would have been forced to liquidate its assets. Given the current market volatility, such a scenario could cause more collapses in the banks that hold Circle’s assets, which could lead to other stablecoins depreciating,” Moody’s said.
The agency noted that the crypto industry could “amplify the shock caused by the traditional economy.”
As a reminder, within five days of decoupling USDC from the US dollar, Circle redeemed approximately USDC 6.2 billion and issued approximately USDC 1.66 billion, reducing the asset’s supply by USDC 4.5 billion.
On March 16, Tether’s USDT stablecoin more than doubled USDC in market capitalization.
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Cryplogger Newsletters: Keep your finger on the pulse of the bitcoin industry!
Moody’s rating agency analysts considerthat the recent decoupling of USD Coin (USDC) from the US dollar could hinder the development of stablecoins and lead to tighter regulation.
“So far, major fiat-backed stablecoins have shown amazing resilience, emerging unscathed from previous scandals such as the FTX crash,” Moody’s said.
The agency’s specialists also noted a significant increase in the capitalization of “stable coins” in recent years.
On March 11, USDC lost its peg to the US dollar after its co-issuer Circle announced that it was holding $3.3 billion in reserves at the Silicon Valley Bank (SVB), which was shut down by the authorities.
The company promised to cover “any shortfall” in backing the stablecoin. However, the USDC fully restored parity with the US dollar only after the US regulators announced the rescue of SVB depositors.
“Otherwise, USDC could have suffered a crash and would have been forced to liquidate its assets. Given the current market volatility, such a scenario could cause more collapses in the banks that hold Circle’s assets, which could lead to other stablecoins depreciating,” Moody’s said.
The agency noted that the crypto industry could “amplify the shock caused by the traditional economy.”
As a reminder, within five days of decoupling USDC from the US dollar, Circle redeemed approximately USDC 6.2 billion and issued approximately USDC 1.66 billion, reducing the asset’s supply by USDC 4.5 billion.
On March 16, Tether’s USDT stablecoin more than doubled USDC in market capitalization.
Found a mistake in the text? Select it and press CTRL+ENTER
Cryplogger Newsletters: Keep your finger on the pulse of the bitcoin industry!
