Asset management giant BlackRock has sounded a cautionary note on stablecoins, particularly Tether (USDT) and Circle (USDC).
The concern centres around potential instability in these coins designed to peg to the US dollar.
BlackRock highlights historical instances, including legal actions against Tether’s operators in 2021 and USDC’s deviation from its $1.00 peg in 2023. Though BlackRock’s Bitcoin ETF doesn’t directly invest in stablecoins, it acknowledges exposure risks due to the interconnected nature of crypto markets.
BlackRock’s concerns extend beyond stablecoin fluctuations, encompassing potential volatility, operational challenges, manipulative practices, and regulatory hurdles.
Indirect exposure to stablecoins, even without direct investments, could pose significant risks to investors in BlackRock’s proposed Bitcoin ETF.
The asset manager’s disclosure underscores the dynamic and intricate risks inherent in the cryptocurrency landscape, emphasizing the need for investor awareness.
In a recent CNBC interview, Cathie Wood, CEO of ARK Invest, raised questions about the stance of SEC Chairman Gary Gensler regarding Bitcoin ETF approvals.
Wood highlighted Gensler’s extensive knowledge of Bitcoin, acquired through teaching about the digital currency at MIT.
Wood emphasised the transparent and decentralised nature of the Bitcoin network, suggesting it minimizes manipulation risks.
She questioned Gensler’s hesitation, speculating that his interest in the Treasury Secretary position might be influencing his stance due to concerns about Bitcoin’s impact on the US dollar.
Wood, perplexed by Gensler’s cautious approach, speculated that his concerns about Bitcoin’s potential impact on the US dollar’s stability could be a driving factor.
Despite multiple applications, the SEC is yet to approve any Bitcoin ETFs. Wood’s insights into Gensler’s perspective shed light on the complexities surrounding regulatory decisions, adding to the anticipation in the market for a regulated entry point into the cryptocurrency space.