Deutsche Bank Warns of Risks to Stablecoins like Tether
Deutsche Bank has expressed concern about the future of stablecoins such as Tether (USDT) and the risks of losing their peg to fiat currencies. The bank’s analysts conducted a study, comparing the current situation in the stablecoin market with historical data on exchange rates of 334 fiat currencies over the past 200 years. They concluded that only 14% of these currencies have managed to maintain stability, and this was possible only due to trust, reserves, and strict control. These factors are often lacking in major stablecoins.
Deutsche Bank analysts noted that stablecoins and fiat currencies have much in common: both types of assets require reliable reserves and confidence in the issuers, and are also susceptible to speculation. Many stablecoins, including the largest one — Tether, are pegged to the US dollar or track its exchange rate.
Stablecoins, such as USDT, are pegged to fiat currencies, usually the US dollar, at a ratio of 1:1 and serve as a primary channel for trading cryptocurrencies, helping to mitigate market volatility of digital assets. Tether remains the market leader with a market capitalization of over $110.86 billion.
Although Tether’s market share has dropped by 13% since the beginning of the year, it still accounts for a significant 69%. In terms of daily trading volume, USDT surpasses bitcoin by $13 billion. In response to questions about its reserves, Tether started publishing quarterly reports since October 2021 after reaching agreements with the CFTC and New York authorities, and paid a fine of $41 million.
Deutsche Bank warns that Tether’s monopoly in the stablecoin market could lead to risks of losing its peg to fiat currencies, which is important to consider in the context of the growing influence of stablecoins on financial markets.
