Why Stablecoins Will Not Be Able To Maintain the Peg

There are fiat currencies pegged to the dollar that face no problems since they are backed by booming economies. China has had a peg to the dollar for decades, and only last decade it decided to slowly adjust the exchange rate. The Yuan (or Renminbi) is considered to be suppressed in valuation versus the USD. This was in order to increase China’s exportations and GDP growth.Before Bitcoin, all previous attempts of creating a digital currency failed mostly because of their centralized features. One admin was able to block transactions and shut down the whole network. Most of the stablecoins currently are centralized and can be censored.The P2P transactions network and the blockchain allowed Bitcoin to overcome any government censoring and provided access to a modern payments network that empowered the individual and removed the state and banks from the transactions equation.The unauthorized issuance of new money in any form is prohibited by financial regulations all over the world. Stablecoins are centralized entities inside the fully globalized cryptocurrency industry.Tether issued USDT in 2016, creating this new category in the market, stablecoins, and they have been increasing their market dominance since then. I’ve explained my thoughts and position on Tether’s USDT in this article: Tether ($USDT): An Accident Waiting To Happen.Stablecoins are pegged another currency usually fiat. Most are pegged to the dollar, and history has taught us the financial regulative bodies do not enjoy competition to the national fiat.Besides the current centralized state of stable crypto assets, a second drawback is the underlying assets required to back these stablecoins. Reserves should be equal to the total marketcap of the stablecoin however, often, we see them lacking transparency and the parent companies being unable to provide adequate proof.Also, volatile assets used as reserves could create an additional danger. In case reserves are…