FSOC: Stablecoins Threaten Financial Stability

The United States Financial Services Oversight Council (FSOC) has expressed concern about the lack of adequate risk management standards in the stablecoin market, which could pose ongoing risks and potentially undermine financial stability.

In its annual report released on December 6th, the FSOC emphasized that stablecoins are particularly vulnerable to runs in the absence of appropriate risk management protocols. The council also noted that the market is currently heavily concentrated, with one firm holding approximately 70% of the total market value.

While the stablecoin market has a total capitalization of $205.48 billion, Tether alone accounts for about 66.3% of that, with a market cap of $136.8 billion, according to data from CoinMarketCap.

Although the council did not specify the firm in question, it cautioned that if this dominant market share continues to expand, the potential failure of this firm could disrupt the wider crypto-asset market and have ripple effects on the traditional financial system.