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By Bruno COLMANT, Ph.D., CFA, Member of the Royal Academy of Belgium
Stablecoins, a type of cryptocurrency, have emerged as a solution to the inherent volatility of traditional cryptocurrencies, such as Bitcoin. The first stablecoin, Tether (USDT), was introduced in 2014 to maintain a stable value by pegging it to the US dollar at a 1:1 ratio. This pegging is typically achieved through collateralization, where a reserve of fiat currency or other assets backs each stablecoin. Tether initially claimed to be fully backed by US dollars, but later disclosures revealed a mix of assets, including commercial paper and other investments, raising concerns about transparency and stability.
The operation of stablecoins relies on a mechanism to maintain...
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