Stablecoins Are Like Other Coins, But Tied to Real Assets

Stablecoin is a cryptocurrency backed by assets such as the USD or gold, making it feel more stable.

A stomach for adventure and a hearty appetite for risk are required to wade through the wild world of cryptocurrency. Consider a stablecoin if you want to ride this carnival but want to choose a crypto that feels somewhat safer.

A stablecoin is a cryptocurrency that is backed by a real-world asset such as the US dollar or gold. A stablecoin's value is supposed to be relatively constant, and it is entirely dependent on the value of the asset to which it is linked. Stablecoins' advocates claim that this feature will make risk-averse individuals and organizations feel more at ease with cryptocurrency if it is, in fact, the future.

Stablecoins are becoming increasingly popular. The market value of stablecoins has increased to roughly $175 billion, compared to early 2020, when they were valued at around $5 billion, according to the Treasury Department.

Unsurprisingly, any asset that claims to be linked to the US dollar will attract regulatory attention, and the House Financial Services Committee convened a hearing on stablecoins yesterday. Nellie Liang, the Treasury Department's undersecretary for domestic finance, warned Congress that a loss of confidence in stablecoins could lead to a run on the currency and its value could plummet.

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