Stablecoins at Risk of Losing Peg During Market Stress, MIT Research Reveals

Stablecoins are facing persistent risks that may lead to them losing their peg during periods of market stress, according to recent research conducted by MIT. These vulnerabilities arise not only from the reserve assets backing the stablecoins but also from their operational infrastructure and redemption mechanisms. According to NS3.AI, current regulations, such as the Genius Act, do not adequately address these issues. Proposed solutions include allowing stablecoin issuers to borrow directly from the Federal Reserve, although this approach presents regulatory and profitability challenges.