Not-so-stable coins: Why currency pegs don’t always work

TERRAUSD’S flop last week has destabilised other stablecoins – even Tether, the largest of such coins, briefly lost its peg to the US dollar. This calls into question their namesake.

Stablecoins, which typically claim to be backed either by real-world assets or crypto collateral, are supposed to avoid volatility. Their use case is to allow crypto traders to transact more efficiently, without using fiat currency.

Tether and USD Coin, the 2 largest stablecoins, say they are backed by a combination of cash, commercial paper, certificates of deposit and Treasury bills.