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May 17, 2023

Fact Sheet: “Un” Stablecoins and Risks to Investors, Consumers, and Economic Productivity

WASHINGTON, D.C.— Legal Director and Securities Specialist Stephen Hall issued the following statement on Better Markets’ fact sheet addressing stablecoins ahead of a House Financial Services Committee Hearing titled “Putting the ‘Stable’ in ‘Stablecoins:’ How Legislation Will Help Stablecoins Achieve Their Promise.”

“The short history of stablecoins has been characterized by instability, bank-like runs, and the evaporation of tens of billions of dollars in investor losses. Our fact sheet explains that despite industry fantasies and talking points touting stablecoins as an innovative and inclusive form of payment, stablecoins have not lived up to the hype as a payment mechanism outside the unregulated crypto ecosystem. Regulators and policymakers should stop and consider the risks to investors, consumers, and the economy before legislating stablecoins into a form of payments.

“Stablecoins are fraught with dangers and downsides.  They have experienced runs much like the waves of withdrawals and redemptions we’ve seen with banks and money market funds, leading to collapse in some cases.  They lack key safeguards like minimum capital requirements and deposit insurance, and many offer no interest or investment return whatsoever.  Some stablecoins are backed by nothing more stable than other cryptocurrencies, or worse, abstract algorithms. And while they are supposedly firmly linked to the price of a reference asset, the reality is that they can and do lose value or “depeg,” thus betraying the notion that they really are stable.  To cap it off, even rights of redemption are often limited and opaque, leaving investors surprised and frustrated to learn that access to their funds is restricted.

“Naturally, some hold out the promise that stablecoins could serve a useful purpose as a reliable form of payment for a broad spectrum of assets.  But so far that hasn’t happened, as stablecoins are simply used to purchase other cryptocurrencies—while exposing those who hold them to a broad range of risks.  History certainly shows that privately issued currencies have proven to be a bad idea.  And these concerns don’t even begin to address the damage that stablecoins might inflict if they were a credible medium of exchange, by siphoning dollars away from banks that use deposits to make loans and fuel the economy. Needless to say, Congress must carefully consider the track record of stablecoins, their demonstrable risks, and their potentially broader impact on the financial system before adopting measures that would legitimize this dangerous corner of the crypto market.”

Read the Fact Sheet here.


Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit

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