Steve Hanke says stablecoins face cross-currency settlement risk - Yahoo Finance

Steve Hanke, a respected economist at John Hopkins, says one of the many inherent flaws of stablecoins is the risk of settling off-chain transactions with them given a time lag, he told yahoo Finance U.K. in an interview Wednesday. The economist warned about stablecoins' cross-currency settlement risk, as they flow within minutes among buyers and sellers, but the assets that back those "stable" coins take at least one day to settle. Hanke looked back to 1974 when the Herstatt Bank in Germany went bankrupt "in between the time they received the Deutsche marks and the payment that was to be made in U.S. dollars," he said, as quoted by Yahoo Finance UK. In turn, the bank's counterparties never received those dollars due to time lags. In the digital asset ecosystem, algorithmic stablecoin TerraUST (UST-USD), which links with Luna (LUNA-USD) to keep its peg with the U.S. dollar, had de-pegged from the greenback and became nearly worthless after tens of billions of dollars got wiped out. That put the rest of the crypto market on edge and increased regulatory scrutiny on the industry. Tether (USDT-USD), the largest stablecoin by market cap, briefly lost its peg to the U.S. dollar in May, but has since remained at $1. In mid-February, reasury Undersecretary for Domestic Finance Nellie Liang said stablecoins aren't so stable.