Fitch Ratings Warned That Stablecoins Could Impact Securities Markets

“Big Three” agency Fitch Ratings warned that stable coins could heavily impact securities markets and said that they could bring new risks to the commercial paper market so let’s read more in our latest crypto news today.

Fitch Ratings warned that the stable coins could pose a risk to the commercial paper market as well as the securities market. The Big Three credit rating agency reported:

“Fitch Ratings believes stablecoins that approach a systemically important scale could come to play an important role in short-term securities markets, such as commercial paper while bringing new risks to these markets.”

The agency added that the extent to which stablecoins impact the securities will depend on the evolution of regulations that are affecting the asset class. They went on to add that the stablecoin-related turbulence could disrupt the commercial paper market and transmit shocks to other market participants. Tether is the world’s largest and most well-known stablecoin with 50% backed by commercial paper. The provider released the assurance report earlier this year which provided a breakdown of the company’s assets. Out of Tether’s total $62.7 billion backings, $30.8 billion came from commercial paper and 10% of Tether’s backing came from cash.

The report was at odds with Tether’s own breakdown of the reserves released which shows that 76% of Tether’s reserves were held in cash or cash equivalents so in turn was at odds with the previous claims by Tether that the token was 100% backed by cash. The USDC stablecoin as per the Grant Thornton accountants is substantially reliant on commercial paper and 14% of the USDC was split between commercial paper and commercial bonds despite the claims by Circle and the company behind USDC was backed by cash 1:1 basis.

Stablecoins like the rest of the industry came under regulatory scrutiny in the past few months. The US Treasury Secretary Janet Yellen already met with a few agencies with the express purpose of carving out the regulatory approach for the stablecoins. In the meeting, Yellen outlined that there’s a need to act fast and ensure stablecoins are reined into the US Regulatory framework.
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FED Chair Jerome Powell also thinks that stablecoins ought to be regulated in a similar way to bank deposits.