Rosengren (Boston Fed): Tether is a potential risk to overall financial stability


f Boston Fed Eric Rosengren announced tether and similar “stable coins” at the end of May as a potential risk factor for general financial stability.

Tether is currently the most popular and valuable cryptocurrency. In essence, the tether is associated with the value of the dollar, and from this position the source of its popularity, because the path of many investors to the world of cryptocurrencies leads first through the tether.

The main risk of the tether is its first “design” associated with the dollar. The market is now increasingly aware that this connection is or may only be “pepper” and in fact not all tethers are fully covered by the underlying dollar.

According to Tether, which covers the cryptocurrency of the same name, only 2.9% of tether is currently covered by cash, and the rest is covered only by commercial paper, which is a form of unsecured most short-term bundles. At about $ 60 billion, the total market capitalization of the Tether is around $ 60 billion, which would mean that the leading Tether has more deposits than many US banks, and the world’s largest paper money is already 10th worldwide.

In this respect, ether is a similar example to traditional monetary funds, but there is a significant difference in that cryptocurrency is not substantially regulated. Unlike the changed funds, where the regulation, on the contrary, is very strong. According to some experts, this is a very high risk. The possible loss of the door to the cryptocurrency cover may cause a very sharp liquidity for the entire cryptocurrency sector, thus for the financial sector as well.

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Concerns about monho’s lack of cover prevailed at the turn of the year in 2018 – see
Tether, apparently, has supported bitcoin in the past. If it falls, it will destroy the whole market cryptocurrency

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