Crypto
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According to a CICC research report, the potential risks of stablecoins themselves will also affect the stability of the financial market. The first is bank runs and liquidity risks. Since stablecoins are issued by private institutions and their stability depends on the quality and transparency of their reserve assets, if the reserve mechanism is insufficient or the asset quality faces downward pressure, it may bring about a crisis of trust and easily cause bank runs, leading to the sale of its holdings, which will indirectly affect the stability of the traditional financial system and even trigger a wider range of liquidity risks. The second is deposit relocation and financial disintermediation. Stablecoins may divert the bank's deposit/loan/exchange business. For example, residents of some countries with high inflation tend to hold stablecoins rather than bank deposits, and stablecoin cross-border payment settlement bypasses the bank's traditional remittance system. If decentralized finance develops further, it may even aggravate the loss of business of traditional financial institutions and trigger financial disintermediation. The third is price fluctuations and market linkage. Stablecoins are highly correlated with the crypto asset market. At the same time, the boundary between crypto assets and traditional stocks is gradually blurring, showing a trend of "coin-stock integration", which is reflected in the fact that crypto assets are beginning to appear in traditional financial markets (such as the listing of coin stocks such as Circle, stablecoins and crypto asset-related targets affecting stock prices through fundamental changes), and traditional financial institutions are beginning to deploy in the crypto asset field (such as providing crypto asset trading services, issuing stock tokenization products, directly holding coins to participate in crypto asset investment, etc.), thereby enhancing the price transmission and linkage effects of the entire crypto asset and traditional financial markets.
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