Analysts at Moody’s believe that the recent depegging of USD Coin (USDC) from the US dollar could hinder the development of stablecoins and lead to tighter regulation.
“So far, fiat-backed stablecoins have demonstrated remarkable resilience, emerging unscathed from previous scandals, such as the collapse of FTX,” Moody’s said.
Analysts also noted the significant growth in the market capitalisation of fiat-backed stablecoins in recent years.
On March 11, USDC lost its peg to the US dollar after its co-emitter Circle announced it held $3.3 billion in reserves in closed by authorities Silicon Valley Bank (SVB).
In the company to cover ‘any shortfall’ of the collateral backing the stablecoin was promised. However USDC fully regained parity with the US dollar only after American regulators announced the rescue of SVB depositors.
“Otherwise, USDC could have suffered a collapse and would have been forced to liquidate its assets. Given current market volatility, such a scenario could have triggered more collapses in the asset-holding banks of Circle, which could lead to the depegging of other stablecoins,” Moody’s said.
The agency noted that the crypto industry could have “amplified the shock caused by the traditional economy.”
In the five days after the depegging, Circle burned about 6.2 billion USDC and issued about 1.66 billion USDC, reducing the asset’s supply by 4.5 billion USDC.
On March 16, Tether’s stablecoin USDT surpassed USDC in market capitalization by more than twofold.