Risks of centralised stablcoins make decentralised approach more attractive.
USDT and USDC are currently the dominant stablenecoins on the market, but their centralised nature and the constant threat of regulation have prompted many crypto-enthusiasts to shun them and seek decentralised alternatives.
What are the reasons?- This month saw a series of unpleasant events all at once, chief among them being the fall in the price of USDC steiblocoin amid the collapse of Silicon Valley Bank (SVB). Circle (the USDC issuer) held $3.3bn of its $40bn of USDC reserves at Silicon Valley Bank. However, it also appeared to be holding money in other banks affected by the fall of SVB.
- WSJ also previously reported on leaked documents and emails allegedly revealing that entities associated with Tether (the USDT issuer) were forging documents and using shell companies to secure access to the banking system.
Once again, we see the weaknesses of the centralised approach. There is always the risk that these issuers are insufficiently transparent and definitely have a single point of failure, which in fact results in inability to maintain stability.
