Algorithmic stablecoins attempt to achieve the same benefits of collateralized stablecoins without the expense and operational complexity of a pool of reserve collateral. Unfortunately, they also have unique vulnerabilities. The complexities of their algorithms make them vulnerable to confusion and/or attack; indeed, there have been several recent examples of major algorithmic stablecoins “de-pegging,” or losing their fix to the US dollar, and thereby erasing billions of US dollars of value. Futures Trading Week: Win Up to 5,000 USDT and Join Our Vip Upgrade Plan! This article discusses the financial stability implications of stablecoins stemming from their current role in the crypto-asset ecosystem. First, it analyses the importance of stablecoins within wider crypto-asset markets before going on to examine whether they fulfil the requirements of practical means of payment in the real economy. The article finishes by highlighting what the current role of stablecoins implies for financial stability and the importance of their regulation.
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