"Stablecoins, effectively Central Business Digital Currency"

Son Min

Summary

Jeremy Kranz said stablecoins could effectively be classified as 'Central Business Digital Currency'.
He said privately issued stablecoins also have surveillance and control functions similar to CBDCs, posing risks such as investors' funds being frozen or account access being blocked.
He pointed out that both overcollateralized and algorithm-based stablecoins carry risks such as bank runs or collapse of their value peg.

It has been argued that stablecoins are a 'Central Business Digital Currency' that carry unique risks compared with central bank digital currencies (CBDCs).

According to Cointelegraph on the 15th (local time), Jeremy Kranz, founder of Sentinel Global, said, "Privately issued stablecoins retain the characteristics of CBDCs, such as surveillance, backdoors, and control," adding, "Such privately issued stablecoins should effectively be viewed as 'Central Business Digital Currency.'" He added, "If JPMorgan issues a dollar-pegged stablecoin and controls it based on related regulations such as the Patriot Act, it could freeze users' funds or block account access."

He also pointed out that even overcollateralized stablecoins backed by cash and short-term government bonds could face bank-run scenarios. In addition, algorithm-based or synthetic stablecoins, which rely on software structures or complex trading mechanisms, "are at risk of having their peg broken due to sharp volatility spikes or flash crashes in the derivatives market."

Meanwhile, according to DeFiLlama, the stablecoin market exceeded 300 billion dollars as of October and is currently around 307 billion dollars.