The European Central Bank has warned the global community of the risks posed by stablecoin cryptocurrency investors.
In keeping with the term “bank run” in traditional financial systems, the same thing can happen to the cryptocurrency stablecoin if the end-user loses trust in its network. In traditional finance, a "bank run" occurs when a large number of customers withdraw their deposits simultaneously due to falling trust in the bank. This can cause the bank to fail because it is unable to pay all the debts due to the simultaneous and sudden withdrawal of cash.
The ECB continues to warn that some parts of the stablecoin arrangement are likely to cease to function as they originally intended in the traditional currency of 2007 during the global financial crisis.
The central bank says that there are several factors that can trigger the stablecoin run in stablecoin. Among the main triggers are attacks on the system or theft of crypto wallets as well as customer doubts about the value of stablecoin.
Stablecoin run can also occur because the stablecoin arrangement promises a fixed value for stablecoin. In this case, the stablecoin issuer should be responsible for bearing all losses arising from the investment, including losses from exchange rate fluctuations
Stablecoin is expected to grow exponentially by 2020 and could be a big surprise in the crypto community
