BlackRock is raising concerns about the potential risks associated with stablecoins. This comes in light of its plans for the iShares Bitcoin spot exchange-traded fund (ETF).
Despite BlackRock’s active involvement in the crypto space, it is now drawing attention to the impact of stablecoin price fluctuations on the performance of its proposed Bitcoin ETF.
Stablecoins like Tether USD (USDT) and Circle USD (USDC), designed to maintain a value equivalent to a specific asset or currency, are specifically highlighted.
The asset manager expresses worry about the potential instability of stablecoins, citing past events that demonstrated significant price movements.
It specifically mentions incidents involving Tether’s operators in February and October 2021, which led to legal actions and penalties due to false claims about reserve backing.
Similarly, on March 10, 2023, USDC deviated from its $1.00 peg, revealing that a portion of its reserves was held at Silicon Valley Bank after the bank went into FDIC receivership. This incident raised concerns about the stability and reliability of stablecoins.
While BlackRock’s proposed Bitcoin ETF doesn’t directly invest in stablecoins, the asset manager acknowledges the indirect exposure and the potential risks they pose for the Bitcoin market and other digital asset markets.
BlackRock cites possible volatility, operational challenges, manipulative practices, and regulatory issues associated with stablecoins as potential risks.