Fitch Ratings, an American credit rating agency, found that rapid growth of stablecoins could have "implications" for the functioning of short-term credit markets. In a recent blog post, the agency noted that the liquidation of stablecoin collaterals could increase pressure for tighter regulation.
"Contagion risks are primarily associated with collateralised stablecoins, varying based on the size, liquidity and riskiness of their asset holdings, as well as the transparency and governance of the operator, among other things," the agency said.
In particular, Fitch Ratings warns Tether, the company behind the USDT stablecoin, might face a "greater run risk" as the asets uses fractional reserves. As of 31 March 2021, Tether held 26.2% of its reserves in cash, fiduciary deposits, reverse repo notes and government securities. A further 49.6% the company held in commercial paper.
The agency emphasized a sudden mass redemption of USDT "could affect the stability of short-term credit markets."
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