With more money going into Stablecoin than municipal bond funds, should you invest?


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If you are thinking of putting your money in stablecoins, you have a lot of company. So far this year, more capital has poured into these dollar-backed digital currencies than into U.S. municipal bond funds, the Blockworks website reported.

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At the end of last week, the top three stablecoins – Tether, USD Coin and Binance USD – had a combined value of over $ 100 billion in assets. That’s nearly three times PayPal’s cash reserves, Blockwords noted.

Tether, USD and Binance have seen their combined value increase by around $ 75 billion in the past year, which is slightly higher than the $ 73 billion added to municipal bond funds over the same period.

Does this mean that you should consider putting your money in stablecoins? Proponents of digital currency say it is a stable investment because it is theoretically backed dollar for dollar by US liquidity. But this is not necessarily the case.

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As Blockwords noted, Tether revealed in May that only 2.6% of its reserves are in cash, with the rest made up of a combination of secured loans, corporate bonds, crypto holdings and others. active. According to other reports, 61% of USD reserves are in cash, while Binance said its stablecoin is backed by US dollars.

Meanwhile, many financial experts and regulators remain wary of stablecoins. As previously reported on GOBankingRates, Federal Reserve Chairman Jerome Powell told the House Financial Services Committee last month that he supported a stricter regulatory framework for stablecoins.

“We have a tradition in this country where public money is held in what is supposed to be a very secure asset,” Powell told the committee. “We have a fairly strong regulatory framework for bank deposits, for example, or money market funds,” he added. “That doesn’t exist for stablecoins, and if they’re going to be an important part of the payments universe… then we need a suitable framework, which we frankly don’t have.”

See: Powell calls for stricter regulatory framework around stable coins
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Last week, Gary Gensler, head of the U.S. Securities and Exchange Commission, said cryptocurrency markets were “rife with fraud, scams and abuse” and called on Congress to confer on the SEC’s new regulatory powers, The Economist reported over the weekend. The UK has banned Binance, while EU regulators have called for more transparency in cryptocurrency transactions.

One thing to keep in mind if you plan to put your money in stablecoins is that you won’t get the same level of financial transparency that you get with other, more regulated asset classes. As The Economist noted, Tether’s disclosures about its asset allocation are well below the standards expected of a bank.

Earlier this year, Tether was among the defendants who accepted an $ 18.5 million fine from the New York attorney general, who said that in 2017, Tether misled the market about his support by U.S. dollars. The AG also said that Tether did not accurately disclose the transfer of $ 625 million of its assets to the online trading platform Bitfinex.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held positions with Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. Her work has also been published in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a BA in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting has been recognized by the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story “Saint Christopher” placed second in the Writer’s Digest 2019 short story contest. Two of his short stories appear in With One Eye on the Cows, one anthology published by Ad Hoc Fiction in 2019. His first novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.


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