Stablecoins face cross-currency settlement risks due to time lags, Nobel laureate Steve Hanke said in an interview with Yahoo Finance on Wednesday.
The economist warned of cross-currency settlement risks for stablecoins because they flow between buyers and sellers in minutes, but the assets backing these stablecoins take at least a day to settle.
Hanke referred to the 1974 Bankhaus Herstatt crisis, when Bankhaus Herstatt, which had $800 million in assets, was closed by Federal German authorities after suffering $450 million in foreign exchange and other losses.
In the digital asset ecosystem, TerraUST, an algorithmic stablecoin pegged to the U.S. dollar, was previously de-pegged from the U.S. dollar, putting the rest of the crypto market at risk, according to Hanke.
