If Stablecoins Are Stable, Why Are Regulators Tense?

If you put a dollar bill under your mattress, you know you’ll get a dollar bill back when you go looking for it, and that the paper currency will still be worth $1. A branch of cryptocurrencies called stablecoins has grown up based on the idea that such dependability can be replicated in new ways. Stablecoins have become crucial to the functioning of crypto markets, with around $136 billion in circulation in mid-February. They’ve also drawn increasing scrutiny from regulators: U.S. financial agencies have called for legislation that treats stablecoin companies in much the same way as banks are, and a New York regulator ordered the issuer of the third-largest stablecoin to stop minting it.

They are digital assets designed to hold a steady value, in contrast to the price volatility seen in Bitcoin and other so-called tokens. They’re usually pegged to another currency, most commonly the US dollar. That makes stablecoins useful for crypto investors who need to park their profits somewhere safe but don’t want to convert them back into real money. The most widely used stablecoin, Tether, can be exchanged for thousands of other cryptocurrencies. There are dozens of stablecoins in use.