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Federal Reserve official: Tetra challenges financial stability

A senior US Federal Reserve official has called the Stablecoin Teter (USDT) a threat to financial stability.

to the the report Boston Federal Reserve Chairman Eric Rosengren, in his speech Friday, listed Tetra as a “challenge” that has hampered “financial stability” and become a “dilemma” for the Fed. Has become. He also described Teter as a “new disruptor” in short-term credit markets.

In an interview with Yahoo Finance the same day, Rosengren explained:

The reason I talk about Stable Coins and Tetra is that if you look at their portfolio, you see that they look exactly like the portfolio of money market investment funds, but perhaps with more risk. Teter-backed assets cover a wide range, and the distance between these assets has widened during the coronavirus epidemic.

Increasing the gap between assets means rushing to sell safer assets that have lower returns and profitability at the same time. For example, corporate bonds fall into the category of profitable and at the same time risky assets, and treasury bonds are safer but less profitable assets. When a large number of people sell their treasury bonds in the credit markets, the balance between these assets is lost and the distance between them widens.

Rosengren also continued:

I think we need to think more broadly about what can disrupt short-term credit markets, and certainly stable coins are one of those elements. Currently, the stable coin market is growing rapidly and these currencies are becoming an important part of our economy. On the other hand, no specific legislation has been passed on them, and I am worried that one day people will suddenly withdraw from these financial instruments.

Caitlin Long, founder and CEO of Avanti Financial, a Wall Street veteran as well as a staunch supporter of Bitcoin, called Rosengren’s remarks “important” and “interesting.” He stated in this regard:

Interestingly, Federal Reserve Governor Lael Brainard and Federal Reserve Chairman Jerome Powell often used the term “coin stables”; But now Rosengren clearly mentions the name “Tetra,” which is astonishing in its own right.

Long went on to say:

The Federal Reserve is very experienced in speaking. Their statements and statements on various issues are worded so precisely that any person from any faction can feel their own interests in what the Fed has said. The Federal Reserve’s previous speeches on the Stables also followed (and were very cautious); But today was a different matter. It is very rare for them to talk about something as openly as they do today.

He added that those bitcoin investors who see the Tetra-centric concerns as exaggerated and out of place should not fundamentally clear the issue and blame the publishers. He said about this:

I have both defended Tetr as a pioneering technology and said that the clarifications that Tetr made raised more questions than it did answer pre-existing questions and ambiguities.

These revelations showed that almost half of the existing tetras were produced with the support of commercial bonds; But it did not disclose any information about the suppliers of these bonds and their creditworthiness. For this reason, there is currently no certainty about the liquidity or validity of Tetra, and any comments we make are our own speculation.

Property Value (in billion dollars) Percentage
cash 1.2 2.9
Treasury Bills 0.9 2.2
Redemption bonds 1.1 2.7
Amani deposits 7.5 18.4
Commercial bonds 20.3 49.6
Guaranteed loans 5.1 12.5
Corporate bonds, funds and precious metals 4.1 10.0
Other investments 0.7 1.6
Total assets 41.01 100.0

Teter plays a very important role in the transfer of $ 1 trillion in assets in the digital currency market. Traders use this stable coin to quickly move digital currencies to exchanges and make a profit from the price difference between these currencies (or arbitrage).

Stable coins are digital currencies that play a role similar to Fiat money in the world of digital currencies, and the theory behind them is that for every stable coin, there is a unit of currency that supports them. However, the ambiguities surrounding Tetr support have existed in the digital currency market for years. The same ambiguities have long been the focus of the New York Attorney General’s Research Center; Until these ambiguities were finally addressed this year.

Of course, despite all the skepticism about Tetra and its financial system, this digital currency has managed to keep its price at around $ 1 for almost its entire life.

Federal Reserve official: Tetra challenges financial stability
Tetra price chart from the beginning of birth until now

Also, despite the new competitors of this digital currency, Tetra has always been able to have the largest amount of capital among the stable coins.

Federal Reserve official: Tetra challenges financial stability
Asset Index in Stable Coins – You see the Tetra chart in green

Finally, Federal Reserve Chairman Jerome Powell, in a speech on the Stables, noted that an article on the Federal Reserve’s view of digital payments, as well as the risks and benefits of the Central Bank (CBDC), is being prepared in the summer. It will be published this year.


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