In a new interview with Yahoo Finance, Tobias Adrian, director of monetary and capital markets for the IMF said the stablecoin sector, in particular, could be vulnerable in such a downturn.
“We could see further selloffs, both in crypto assets and in risky asset markets, like equities… There could be further failures of some of the coin offerings – in particular, some of the algorithmic stablecoins that have been hit most hard, and there are others that could fail.”
Adrian isn’t just concerned about algorithmic stablecoins. The IMF official specifically mentioned Tether (USDT), the largest stablecoin by market cap, as an asset that could face major stress tests.
“There’s some vulnerability there, because they’re not backed one to one… [Some fiat-backed stablecoins] are backed by somewhat risky assets…it is certainly a vulnerability that some of the stablecoins are not fully backed by cash-like assets.”
Adrian says that 100% cash-backed stablecoins would be less susceptible to such a situation.
The IMF director also says that one of the main priorities for authorities should be to regulate the industry’s key choke points like wallets and exchanges.
“There are 40,000 coins out there. Regulating the coins themselves is going to be difficult, but regulating the entry points such as exchanges and wallet providers to invest in those coins, that’s something that is very concrete and very feasible.”