The US Federal Reserve says that the rising use of stablecoins to meet margin requirements in leveraged crypto trade increases the redemption risks.
Source: Federal Reserve
BTCUSD is up +4.39%
The agency said during a semi-annual Financial Stability Report that stablecoins were supported by assets that may lose value or become illiquid under pressure.
The US Central bank has echoed the same comments saying that the asset class was susceptible to runs due to a lack of transparency around the asset class.
Fed had previously warned of the risks related to the rapidly expanding asset class as a tightened monetary policy and reducing liquidity make investors shy away.
TerraUSD has been cited as being at risk of losing its peg to the USD even as the project developers move to increase BTC and AVAX reserves. USDT, USDC, and BUSD are the three largest stablecoins currently commanding about 80% of the total market value.