Regulators don’t like it (4/5)

Washington has more than its fair of critics when it comes to Stablecoin regulation. Take Elizabeth Warren, for example.

“Stablecoins pose risks to consumers & to our economy. They’re propping up one of the shadiest parts of the crypto world, DeFi, where consumers are least protected from getting scammed. Our regulators need to get serious about clamping down before it is too late.”

In a recent paper, economists Gary B. Gorton and Jeffrey Zhang made an analogy of when 19th century era banks issued their own currency. There were frequent ‘bank runs’ during crashes, which led to massive economy instability.

A lot of the regulation comes from the fact that people are skeptical about whether these exchanges actually have something backing their dollar. USD Tether CLAIMS to have a lot of money, but no one really knows for sure.

If the asset isn’t backed by any reserves, it’s nothing more than an empty promise. If Tether ever collapsed it could prove to be one of the biggest ponzi schemes in the entire world.