The new Fed report classifies Stablecoins as a "threat" 

In its latest financial stability report released Monday, the US Federal Reserve ranked cryptocurrencies and stablecoins among its top risks to US financial stability over the next 12-18 months.

The Fed ranks cryptocurrencies and stablecoins just behind tensions between the US and China

The Fed's report is printed twice a year, once in the spring and another in the fall, and its current edition includes this chart below from page 67, which ranks cryptocurrencies / stablecoins as the fifth most serious risk to the financial stability - hidden between the United States - Tensions in China and climate problems.

Why are stablecoins such a threat?

The section of the report regarding stablecoins described them as digital assets issued and traded on blockchain, which are "assumed" to be anchored to a stable off-chain asset such as gold, fiat currencies or government bonds. The report also noted that the value of stablecoins has quintupled exponentially over the past 12 months to reach $ 130 billion in October 2021.

Here are the main concerns cited in the Fed's publication

• The largest stablecoins by market cap promise to be redeemable at any time at a stable value in US dollars, but each token is not necessarily backed up 1: 1 with a fiat equivalent. Conversely, some stablecoins are backed by commercial bonds, which could lose value or become illiquid. If these assets lose value, issuers may not be able to meet redemption requests.
• Stablecoins have structural weaknesses similar to certain money market funds, which make them susceptible to liquidation runs by Investors who could empty their accounts all at once.
• The report says these shortcomings could be amplified by a lack of transparency and governance standards regarding some of the assets that support stablecoins.
• Finally, the potential use of stablecoins in payments and their ability to grow can also pose risks to payment and financial systems.

Whether or not the specific stablecoin threats are real or exaggerated FUDs, they were real enough to be included in this report by Fed members. However, it could be convincingly argued that all four bullet points cited as stablecoin vulnerabilities could also apply to most fiat currencies, including the US dollar. This is especially true when viewed in the context of the government's fiscal and monetary policies in recent years.

Conclusions

As stated in the last paragraph, the risks and criticisms they associate with stablecoins can also be applied to fiat currencies.

It is ridiculous that the Fed believes cryptocurrencies and stablecoins are as much a threat to US financial stability as US-China tensions and global warming.

The government sees stablecoins as a threat to its sovereignty. Their opposition to stablecoins is a good indicator that stablecoins are a good idea for us.