According to Jeremy Kranz, founder and managing partner of enterprise capital firm Sentinel Global, investors should exercise “discretion” when considering privately issued stablecoins, which carry all of the risks of a central bank digital currency (CBDC) in addition to their very own unique risks.
Kranz described privately issued stablecoins as “central digital business currencies” which have all of the surveillance, backdoor, programmability and control features like CBDCs. He told Cointelegraph:
“Central Business digital currency really isn't necessarily any different. So if JP Morgan issues a dollar stablecoin and controls it through the Patriot Act, or whatever else comes out in the long run, they will freeze your money and unbank you.”Sentinel Global founder and managing partner Jeremy Kranz. Source: Sentinel Global
Kranz added that overcollateralized stablecoin issuers that back their blockchain tokens with money and short-term government securities could face a “bank run” if too many holders attempt to redeem the tokens at the identical time.
Algorithmic and artificial stablecoins that depend on software or complex trades to take care of their dollar peg even have their very own counterparty risks and dependencies, reminiscent of the chance of decoupling from volatility or flash crashes in crypto derivatives markets, he told Cointelegraph.
Kranz said technology is a neutral tool that will be used or abused to construct a greater financial future for humanity. However, the outcomes depend upon individual investors reading the high quality print, understanding the risks and making informed decisions in regards to the financial instruments they decide to hold.
A wealth of opportunities and risks threaten
The rapid pace of innovation in stablecoins, crypto and tokenization technologies is like “10 black swan events,” Kranz told Cointelegraph, emphasizing that each opportunities and risks arise from rapid and disruptive technological advances.
According to data from DeFiLlama, the market capitalization of stablecoins surpassed $300 billion in October.
Stablecoins experienced increased interest following the passage of the GENIUS stablecoin law within the United States, which elicited mixed reactions from lawmakers.
Marjorie Taylor Greene, a US representative from Georgia, called the bill a CBDC Trojan. “This bill regulates stablecoins and provides for the backdoor central bank digital currency,” she said in a July 15 X post.
“The Federal Reserve has been planning a CBDC for years, and this can open the door to a cashless society and a digital currency that will be used as a weapon against you by an authoritarian government that controls your ability to purchase and sell,” she added.
