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Stablecoins: Depegging, fraudsters and decentralization

Opinion by: Merav Ozair, PhD

Lately, stablecoins are everywhere — this time around, headed by “traditional” financial institutions. Bank of America and Standard Chartered are considering launching their own stablecoin, joining JPMorgan, which launched its stablecoin, JPM Coin — rebranded as Kinexys Digital Payments — to facilitate transactions with their institutional clients on their blockchain platform, Kinexys (formerly Onyx). 

Mastercard plans to bring stablecoins to the mainstream, joining Bleap Finance, a crypto startup. The aim is to enable stablecoins to be spent directly onchain — without conversions or intermediaries — seamlessly integrating blockchain assets with Mastercard’s global payment rails. 

In early April 2025, Visa joined the Global Dollar Network (USDG) stablecoin consortium. The company will become the first traditional finance player to join the consortium. In late March 2025, NYSE parent Intercontinental Exchange (ICE) announced that it is investigating applications for using USDC (USDC) stablecoin and US Yield Coin within its derivatives exchanges, clearinghouses, data services and other markets.

Why the renewed interest in stablecoins?

Regulatory clarity and acceptance

Recent moves by regulatory bodies in the United States and Europe have created more straightforward guidelines for cryptocurrency use. In the US, Congress is considering legislation to establish formal standards for stablecoins, bolstering confidence among banks and fintech companies.

The European Union’s Markets in Crypto-Assets regulation requires that stablecoin issuers operating within the EU adhere to specific financial standards, including special reserve requirements and risk mitigation. In the UK, financial authorities plan to conduct consultations to draft rules governing stablecoin use, further facilitating their acceptance and adoption.

The Trump administration executive order 14067, “Strengthening American Leadership in Digital Financial Technology,” supports and “promotes the development and growth of lawful and legitimate dollar-backed stablecoins worldwide” while “prohibiting the establishment, issuance, circulation, and use of a CBDC within the jurisdiction of the United States.”

This executive order, followed by Trump’s World Liberty Financial company launching a stablecoin called USD1, signals that this is the era of stablecoins, particularly those pegged to the USD.

Do we need more stablecoins?

The stablecoin landscape

There are over 200 stablecoins, most pegged to the US dollar. Two established stablecoins dominate the stablecoin landscape. Tether’s USDt (USDT), the oldest stablecoin, launched in 2014 and USDC, launched in 2018, capturing 65% and 28% of stablecoins market cap, respectively — both are centralized fiat collateralized. 

Recent: Crypto wanted to overthrow banks, now it’s becoming them in stablecoin fight

In third place, a relatively new one, USDe, launched in February 2024, holds about 2% of the stablecoin market cap and has an unconventional mechanism based on derivatives in the crypto market. Although it runs on a DeFi protocol on Ethereum, it incorporates centralized features since centralized exchanges hold the derivatives positions.

There are three primary mechanisms of stablecoins:

  • Centralized, fiat-collateralized: A centralized company maintains reserves of the assets in a bank or trust (e.g., for currency) or a vault (e.g., for gold) and issues tokens (i.e., stablecoins) that represent a claim on the underlying asset.

  • Decentralized, cryptocurrency-collateralized: A stablecoin is backed by other decentralized crypto assets. One example can be found in the MakerDAO stablecoin Dai (DAI), which is pegged to the US dollar and encapsulates the features of decentralization. While a central organization controls centralized stablecoins, no one entity controls the issuance of DAI.

  • Decentralized, uncollateralized: This mechanism ensures the stability of the coin’s value by controlling its supply through an algorithm executed by a smart contract. In some ways, this is no different from central banks, which also don’t rely on reserve assets to keep the value of their currency stable. The difference is that central banks, like the Federal Reserve, set a monetary policy publicly based on well-understood parameters, and its status as the issuer of legal tender provides the credibility of that policy.

Depegging, risk and fraudsters

Stablecoins are supposed to be stable. They were created to overcome the inherent volatility of cryptocurrencies. To maintain their stability, stablecoins should (1) be pegged to a stable asset and (2) follow a mechanism that sustains the peg.

If stablecoins are pegged to gold or electricity, they will reflect the volatility of these assets and thus may not be the best choice if you are seeking a no-risk (or close to no-risk) asset.

USDe maintains a peg to the USD through delta hedging. It uses short and long positions in futures, which generates a 27% yield annually — significantly higher than the 12% annual yield of other stablecoins pegged to the USD. Derivative positions are considered risky — the higher the risk, the higher the return. Therefore, it encapsulates an inherited risk due to its reliance on derivatives, which runs counter to the purpose of stablecoins. 

Stablecoins have been around for more than a decade. During this time, there were no major depegging fiascos other than the case of Terra. The collapse of Terra was not the result of a reserve problem or mechanism but rather the act of fraudsters and manipulators.

TerraUSD (UST) had a built-in arbitrage mechanism between UST and the Terra blockchain native coin, LUNA. To create UST, you needed to burn LUNA.

To entice traders to burn LUNA and create UST, the creators of the Terra blockchain offered a 19.5% yield on staking, which is crypto terminology for earning 19.5% interest on a deposit, through what they called the Anchor protocol.

Such a high interest rate is simply not sustainable. Someone has to borrow at such a rate or above for the lender to receive 19.5% interest. This is how banks make their profit — they charge high interest on borrowing (such as mortgages or loans) and provide low interest on savings (such as a traditional savings account or a certificate of deposit account). Analysis of the Anchor protocol in January 2022 showed it was at a loss.

One of the allegations in the lawsuits against Terraform Labs’ founders is that the Anchor protocol was a Ponzi scheme.

In March 2025, Galaxy Digital reached a $200-million settlement with the New York Attorney General over claims the crypto investing company promoted the LUNA digital asset without disclosing its interest in the token.

In January 2025, Do Kwon, founder of Terra, was found liable for securities fraud and is facing multiple charges in the US, including fraud, wire fraud and commodities fraud. If regulators are interested in preventing future cases like Terra, they should focus on how to deter fraudsters and manipulators from issuing or engaging with stablecoins.

Decentralization: Rekindling the premise of Bitcoin

Most stablecoins are centralized assets collateralized. They are controlled by a company that could conduct unauthorized use of customers’ funds or falsely claim that reserves fully back a stablecoin.

To prevent companies’ misconduct, regulators should closely monitor these companies and set rules similar to securities laws. 

Centralized stablecoins run counter to the notion of blockchain and the premise of Bitcoin. When Bitcoin was launched, it was supposed to be a payment platform free of intermediaries, not controlled by any company, bank or government — a decentralized mechanism — run by the people for the people.

If a stablecoin is centralized, it should follow the regulations of any other centralized asset.

Maybe it’s time to rekindle the premise of Bitcoin but in a more “stable” fashion. Developing an algorithmic, decentralized stablecoin that is free of any control of a company, bank or government and reviving the core notion of blockchain.

Opinion by: Merav Ozair, PhD.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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Rayner ‘hoping’ for winter fuel update within weeks – and says she ‘never’ wants to be Labour leader

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Rayner 'hoping' for winter fuel update within weeks - and says she 'never' wants to be Labour leader

Deputy Prime Minister Angela Rayner has told Sky News she “hopes” there will be an update on the winter fuel U-turn within weeks.

Ms Rayner also used her interview on Sunday Morning With Trevor Phillips to say she “never” wants to lead her party.

Some had suggested recent leaks of her plans for when taxes should change were her testing the waters to run a challenge against Sir Keir Starmer.

Politics latest: Badenoch on two-child cap

Earlier this week, the prime minister confirmed his party was looking to make changes to its controversial slashing of winter fuel payments to pensioners at an upcoming “fiscal event”.

Little clarity was provided on when this would be – the budget in the autumn thought the most likely.

Deputy Prime Minister Angela Rayner during a visit to Rossington Miners' Welfare in Doncaster, South Yorkshire, whilst campaigning for this week's local elections. Picture date: Wednesday April 30, 2025.
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Angela Rayner says she wants the changes announced soon. Pic: PA

Ms Rayner has now suggested the 11 June spending review in just over a fortnight is her preferred date.

She told Sky News: “I think that we’ve got the upcoming spending review, and I’m sure that the chancellor will set it out when we’ve got the opportunity – at the first opportunity Trevor she will set out what we’ll be able to do.”

Asked if changes might be announced at the review, Ms Rayner said: “I hope so, but I don’t know. But I hope so.

“I mean, the prime minister’s announced it, so logically to me that indicates that the prime minister wants to do something in this area.

“And if the prime minister wants to do that, I’m sure the chancellor is going to look at how we can achieve that.”

Read more:
Starmer confirms U-turn on winter fuel
Decision needs ‘strong enough’ economy
Analysis: It could have profound consequences

Never wants to be leader

Some might suggest Ms Rayner’s stance was a bid to push Downing Street into an announcement faster than it previously wanted.

It would add to rumours the deputy prime minister is unhappy with the way Sir Keir and Rachel Reeves are running the government.

However, when asked by Trevor Phillips if she wanted to lead her party, Ms Rayner was unequivocal.

“No. I’m very happy and honoured to be deputy prime minister of this country,” she said.

“And I’ve got a lot in my in-tray to prove that I can do the job that I’m doing and deliver on the milestones for the people in this country.”

She continued: “I have no desire to go for the leadership of the Labour Party.”

👉 Listen to Electoral Dysfunction on your podcast app 👈

Asked to say the word “never”, Ms Rayner repeated “never”.

Ms Rayner also confirmed a leak inquiry was under way after her proposals on tax and spend sent to the chancellor ended up published in The Daily Telegraph.

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Two-child benefit cap: Pressure grows on Starmer as Reform’s policy move parks tanks on Labour’s lawn

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Two-child benefit cap: Pressure grows on Starmer as Reform's policy move parks tanks on Labour's lawn

No U-turn comes without a political cost.

This weekend, it has become clear there is a price to pay for Sir Keir Starmer’s decision to row back on winter fuel payment cuts.

One MP said in a text message: “We all want to see more”, while former prime minister Gordon Brown told Sky News this week the two-child benefit cap was “pretty discriminatory” and could be scrapped.

Nigel Farage
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Nigel Farage is expected to call for the two-child benefit cap to be scrapped

The cap, which prevents parents from claiming child tax credit or universal credit for more than two children, is a symbolic sore for Labour that saw seven MPs suspended from the party last year.

Now it’s back to cause more trouble.

A Downing Street source suggests little has changed in the last week, and looking at the cap has always been part of the (now delayed) Child Poverty Strategy.

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‘You’ve got to be fair to pensioners’

But, beyond the whispers behind the scenes, one thing has overtly changed this weekend – growing pressure from Nigel Farage.

We expect Reform UK to announce this week that it will reinstate winter fuel payments and drop the cap.

Mr Farage is parking his tanks on Labour’s lawn, trying to tap into working-class votes on uncomfortable territory for Mr Starmer.

How would they pay for it? A combination of closing asylum hotels, cutting aid, and scrapping net-zero targets, the party says.

Kemi Badenoch on Sunday Morning with Trevor Phillips.
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Conservative leader Kemi Badenoch

Headline-grabbing move

The beauty of not being in power is not having to make all the sums add up right now, and it is a headline-grabbing announcement that will, at the very least, reignite the conversation about the two-child cap.

It’s also a reminder that Reform UK, who were beaten by Labour in 89 out of the 98 constituencies they came second in last year, have set their sights beyond the Conservatives.

As for the Tories, who introduced the measure in 2017, leader Kemi Badenoch is clear, saying: “If you can’t afford to have lots of children, then you shouldn’t do so”.

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Deputy Prime Minister Angela Rayner is hoping for an update on the winter fuel allowance

Blue water between Tories and Reform UK

So, there is blue water between the Conservatives and Reform, but it’s the prime minister and his party that Nigel Farage is targeting now, and Labour is unclear on where it stands.

Deputy leader Angela Rayner told Sunday Morning With Trevor Phillips that “lifting any measures that alleviate poverty is not a bad idea”.

More from Sky News:
PM’s winter fuel claim ‘not credible’
Starmer-Reeves Downing St ‘rift’

With the spending review fast approaching, Sir Keir and Chancellor Rachel Reeves will be working out the actual cost, beyond the political one, of rowing back on winter fuel payment cuts.

But will the anger that the policy ignited among some Labour MPs end there? Or will it move to another uncomfortable subject?

As one MP puts it: “If there’s money for pensioners, why not children?”

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Pakistan allocates 2,000MW power for Bitcoin mining and AI centers

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Pakistan allocates 2,000MW power for Bitcoin mining and AI centers

Pakistan allocates 2,000MW power for Bitcoin mining and AI centers

Pakistan has allocated 2,000 megawatts of surplus electricity exclusively for Bitcoin mining and artificial intelligence centers.

The move is part of a broader digital transformation plan spearheaded by the Pakistan Crypto Council and backed by the Ministry of Finance, according to a May 25 report by local news outlet 24NewsHD TV Channel.

In the first phase, the government plans to channel excess power into AI infrastructure and crypto mining operations. Finance Minister Muhammad Aurangzeb said the decision is expected to attract billions in foreign investment while generating high-tech employment across the country.

The initiative’s second phase will introduce access to renewable energy for mining operations, aiming to balance growth with environmental responsibility.

Related: Trump-backed World Liberty Financial partners with Pakistan Crypto Council

Pakistan unveils tax incentives to attract investors

Per the report, interest from international Bitcoin (BTC) miners and AI firms has already picked up. Officials confirmed that multiple foreign delegations have visited Pakistan in recent months to explore potential partnerships.

To further incentivize investment, the Ministry of Finance announced a package of tax incentives for AI centers and duty exemptions for Bitcoin miners.

Bilal Bin Saqib, CEO of Pakistan’s Crypto Council, reportedly welcomed the development, calling it a “turning point” for the country’s digital economy.

Saqib claimed that with clear regulations and a transparent framework, Pakistan could emerge as a significant player in the global crypto and AI sectors.

Saqib first proposed using the country’s runoff energy to fuel Bitcoin mining at the Crypto Council’s inaugural meeting on March 21.

The meeting included lawmakers, the Bank of Pakistan’s governor, the chairman of Pakistan’s Securities and Exchange Commission (SECP), and the federal information technology secretary.

Related: Pakistan proposes compliance-based crypto regulatory framework — Report

Pakistan creates Digital Asset Authority

On May 21, Pakistan’s Ministry of Finance endorsed the creation of a dedicated body to regulate blockchain-based financial infrastructure in the country.

The Pakistan Digital Assets Authority (PDAA) will serve as a regulatory body to oversee licensing and regulating exchanges, custodians, wallets, tokenized platforms, stablecoins, and decentralized finance applications.

The PDAA will also be tasked with tokenizing national assets and government debt, facilitating monetization of Pakistan’s surplus electricity through regulated Bitcoin mining, and helping startups build blockchain-based solutions at scale.

Pakistan ranked highly in Chainalysis’ 2024 crypto adoption index, coming in ninth, mainly due to strong retail adoption and transactions at centralized services.

Pakistan allocates 2,000MW power for Bitcoin mining and AI centers
Pakistan ranked highly in Chainalysis’ 2024 crypto adoption index, coming in 9th. Source: Chainalysis

Data from Statista also shows Pakistan’s crypto market is “experiencing rapid growth,” estimating the number of crypto users to amount to over 27 million by 2025, out of a population of 247 million.

Magazine: Bitcoin bears eye $69K, CZ denies WLF ‘fixer’ rumors: Hodler’s Digest, May 18 – 24

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