In an annual report published on Friday, the United States Financial Stability Oversight Council, or FSOC, voiced its concern over the adoption of stablecoins and other digital assets.
Regarding stablecoins, the FSOC said consumer confidence could be undermined by factors such as illiquidity, lack of appropriate safeguards, opacity regarding redemption rights, and cyber attacks. "A run on stablecoins during strained market conditions may have the potential to amplify a shock to the economy and the financial system," the report said.
The report also alerted to developments in decentralized finance, or DeFi, where the use of high leverage could trigger a fire sale when the price of the underlying asset declines. This would result in a cycle of
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