Stablecoins

Subject – Economy

Context – Stablecoins face crackdown as US discusses risk council review

Concept –

A stablecoin is a new class of cryptocurrencies that attempts to offer price stability and are backed by a reserve asset.
Stablecoins have gained traction as they attempt to offer the best of both worlds—the instant processing and security or privacy of payments of cryptocurrencies, and the volatility-free stable valuations of fiat currencies.
Stablecoins may be pegged to a currency like the U.S. dollar or to a commodity’s price such as gold.
Stablecoins achieve their price stability via collateralization (backing) or through algorithmic mechanisms of buying and selling the reference asset or its derivatives.
While bitcoin remains the most popular cryptocurrency, it tends to suffer from high volatility in its valuations.
Two primary reasons for the price stability of fiat currencies are the reserves that back them and the timely market actions by the controlling authorities, like central banks.

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