Investors should exercise \u201cdiscernment\u201d when considering privately-issued stablecoins, which carry all the risks of a central bank digital currency (CBDC) plus their own unique risks, according to Jeremy Kranz, founder and managing partner of venture capital firm Sentinel Global.<\/p>\n
Kranz called privately-issued stablecoins \u201ccentral business digital currency,\u201d which feature all of the surveillance, backdoors, programmability, and controls as CBDCs<\/a>. He told Cointelegraph:<\/p>\n \u201cCentral business digital currency is really not necessarily that different. So, if JP Morgan issued a dollar stablecoin and controlled it through the Patriot Act, or whatever else comes out in the future, they can freeze your money and unbank you.\u201d<\/p><\/blockquote>\n Overcollateralized stablecoin issuers, which back their blockchain tokens with cash and short-term government securities, can be subject to \u201cbank runs\u201d if too many holders attempt to redeem the tokens at the same time, Kranz added.<\/p>\n Algorithmic and synthetic stablecoins, which rely on software or complex trades to maintain their dollar-peg, also feature their own counterparty risks and dependencies<\/a>, like the risk of de-pegging from volatility or flash crashes<\/a> in crypto derivatives markets, he told Cointelegraph.<\/p>\n Kranz said technology is a neutral tool that can be used to build a better financial future for humanity or be misused, but the outcomes are reliant on individual investors reading the fine print, understanding the risks, and making informed choices about the financial instruments they choose to hold.<\/p>\n <\/p>\n Related: <\/strong><\/em>S&P Global taps Chainlink to rate stablecoins\u2019 ability to retain peg<\/strong><\/em><\/a><\/p>\n The rapid pace of innovation in stablecoins, crypto, and tokenization technologies is like \u201c10 black swan events,\u201d Kranz told Cointelegraph, stressing that both opportunities and risks will arise from rapid and disruptive technological progress.<\/p>\n The stablecoin market capitalization crossed the $300 billion milestone<\/a> in October, according to data<\/a> from DeFiLlama.<\/p>\n Stablecoins experienced heightened interest following the passage of the GENIUS stablecoin bill<\/a> in the United States, which drew mixed reactions from lawmakers.<\/p>\n Marjorie Taylor Greene, a US representative from Georgia, called the bill a CBDC Trojan Horse<\/a>. “This bill regulates stablecoins and provides for the backdoor central bank digital currency,\u201d she said in a July 15 X post<\/a>.<\/p>\n \u201cThe Federal Reserve has been planning a CBDC for years, and this will open the door to move you to a cashless society and into digital currency that can be weaponized against you by an authoritarian government controlling your ability to buy and sell,\u201d she added.<\/p>\nA plethora of opportunities and risks are coming down the pipeline<\/h2>\n