Investors should exercise “discernment” when considering privately issued StableCoins, which carry all the risks of a central digital currency (CBDC) with their own unique risks, according to Jeremy Kranz, founder and managing partner of venture capital firm Sentinel Global.
Kranz calls the privately issued StableCoins “Central Business Digital Currency,” featuring all of the Surveillance, backdoors, programmability, and controls as CBDCs. He told Cointelegraph:
“The central business of digital currency is really not necessarily different. So, if JP Morgan issues a dollar stablecoin and it’s regulated through the Patriot Act, or whatever comes up in the future, they can freeze your money and you’re not bound.”
Overcollateralized stablecoin issuers, who back their blockchain tokens with cash and short-term securities, could be subject to “bank runs” if too many holders attempt to redeem the tokens at the same time, Kranz added.
Algorithmic and synthetic stablecoins, which rely on software or complex trades to maintain their dollar-peg, also feature themselves Counterparty risks and dependenciessuch as the risk of De-pegging from volatility or flash crashes On the crypto derivatives markets, he told Cointelegraph.
Kranz said that technology is a neutral tool that can be used to build a better financial future for humanity or abused, but the outcomes depend on individual investors reading the fine print, understanding the risks, and making informed choices about the financial instruments they choose to hold.
Related: S&P Global Taps Chainlink To rate StableCoins’ ability to maintain PEG
A plethora of opportunities and risks are coming down the pipeline
The rapid pace of change in StableCoins, Crypto, and Tokenization Technologies is like “10 Black Swan events,” Kranz told Cointelegraph, emphasizing that both opportunities and risks will arise from rapid and disruptive technological development.
The market capitalization of StableCoin Cross the $300 billion milestone in October, according to Data from Defillama.
StableCoins experienced higher interest following Passing the genius StableCoin Bill in the United States, drawing mixed reactions from lawmakers.
Marjorie Taylor Greene, a US representative from Georgia, called the bill a CBDC Trojan Horse. “This bill regulates StableCoins and provides for a backdoor central bank digital currency,” he said in a July 15 x Post.
“The Federal Reserve has been planning a CBDC for years, and it will open the door to move you to a cashless society and to digital money that can be weaponized against you by a government authority that controls your ability to buy and sell,” he added.
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