Cryptocurrency continued their drop on Monday, giving back the gains they had made over the weekend.
In Asian trade on Monday, bitcoin plummeted 5% to roughly $29,700, following stock market declines due to concerns about soaring inflation and rising interest rates.
European regulators have issued new cautions about the dangers of cryptocurrencies as Bitcoin looses around 1/5th of its value so far this month.
Bitcoin declines, European Regulators Warn
Crypto assets, according to Bank of France Governor Francois Villeroy de Galhau, might destabilize the international financial system if they are not regulated and made interoperable consistently and effectively across states.
Stablecoins, which he claimed were misnamed, were one of the causes of risk, he said.
Separately, Fabio Panetta, a member of the European Central Bank’s executive board. He cautioned on Monday that stablecoins were vulnerable to runs.
On May 12, Tether, the world’s largest stablecoin, briefly lost its 1:1 peg before regaining it. Tether, unlike TerraUSD, is backed by traditional asset reserves, according to its operating firm. Bitcoin fell to $25,400 on the same day, its lowest level since December 2020, before recovering to $31,400 on Sunday.
Regulators from other countries are also concerned. Stablecoins are vulnerable to investor runs, according to the US Federal Reserve. It is because they are backed by assets that could lose value or become illiquid in times of market stress.