CRYPTOCURRENCY → STABLE-COINS Flashcards
What is a stablecoin?
A type of cryptocurrency with a price designed to be pegged to a reserve asset like gold, the US dollar, or other fiat currencies.
Name at least three examples of stablecoins.
Tether, Basecoin, TrueUSD, and Facebook’s proposed ‘Libra’ (though Libra never launched).
Why are stablecoins designed to be “stable”?
They are backed by reserve assets, which are intended to reduce price volatility compared to other cryptocurrencies.
List four key challenges associated with stablecoins.
Money laundering
Terror financing
Lack of consumer protection
Financial frauds
True or False: Stablecoins have been widely embraced by all countries and regulatory groups.
False. In 2019, France, the EU, and G20 voiced opposition to stablecoins.
Why might governments or financial groups oppose stablecoins?
Concerns about potential use for illegal activities, lack of regulation, and possible disruption to traditional financial systems.
If stablecoins are backed by reserve assets, why is there still concern about their stability?
Transparency: The nature and quality of reserve assets may not be fully transparent.
Management: There may be mismanagement of reserve assets.
Market pressures: Extreme market conditions could put pressure on the asset peg.
Do you think stablecoins have the potential to become a widely accepted form of digital currency? Why or why not?
This is an opinion-based question to encourage discussion. Consider factors like regulation, trust, security, and the overall evolution of digital payments.
If stablecoins are backed by reserve assets, why is there still concern about their stability?
Asset Peg: The mechanism by which a stablecoin maintains its value relative to the reserve asset (e.g., 1 stablecoin = $1 USD). Concerns arise because:
Transparency: The nature and quality of reserve assets may not be fully transparent. Are the reserves truly held in the amount claimed? Are they high-quality assets?
Management: There may be mismanagement of reserve assets, either intentionally or through poor practices.
Market pressures: Extreme market conditions (e.g., sudden crash in the reserve asset’s value) could break the peg, causing the stablecoin to lose its stable value.
