- Deutsche Bank has raised concerns over the stability and transparency of most stablecoins, including Tether.
- The bank’s research suggests that most currency-pegged stablecoins are likely to fail in the future.
- Tether has rejected the report, stating it lacks substantial evidence.
Deutsche Bank has cast doubt on the future of most stablecoins, including Tether, citing a lack of transparency and credibility. This article explores the bank’s findings and the potential implications for the crypto market.
Deutsche Bank’s Stablecoin Concerns
Research analysts at Deutsche Bank recently raised a red flag on the stablecoin market, stating that most of the pegged currencies are likely to fail moving forward. After studying nearly 334 currency pegs, Deutsche Bank found that only 14% of them have survived so far. “Some may survive, although most will likely fail,” the analysts wrote in a recently published research note. This prediction comes at a time when big market players like Ripple expect the stablecoin market to reach $3 trillion by 2028.
Stablecoins and Credibility
Stablecoins, which usually maintain a one-to-one peg with fiat currencies such as the Dollar and Euro, provide convenience for crypto investors for trading in crypto while simultaneously protecting them from volatile price swings. However, according to analysts from Deutsche Bank, the enduring success of pegged currencies relies on credibility, reserve backing, and stringent operational controls—qualities that several major stablecoins currently lack. “The 30% de-peg rate among some stablecoins is therefore hardly surprising, and many more defunct stablecoins are hard to account for,” said the Deutsche Bank researchers.
Questioning Tether’s Transparency
The research team expressed apprehension regarding Tether due to its dominant position in the stablecoin market, characterized by speculation and a lack of transparency. They highlighted Tether’s track record of misleading statements regarding reserve holdings, resulting in fines totaling $41 million from the Commodity Futures Trading Commission (CFTC). A recent report also suggested that Tether (USDT) remained the most-used stablecoin for criminal activity. Tether has responded to these concerns by issuing quarterly attestations of its reserves following settlements with both the CFTC and New York state authorities. Tether responded to these allegations stating: “The report lacks clarity and substantial evidence, relying on vague assertions rather than rigorous analysis.”
Conclusion
Deutsche Bank’s concerns over the stability and transparency of most stablecoins, including Tether, could have significant implications for the crypto market. While Tether has dismissed the report, the debate over the credibility and future of stablecoins continues. As the crypto market evolves, the need for greater transparency and stringent operational controls for stablecoins becomes increasingly apparent.
