According to BlockBeats, on August 16, Circle released a white paper titled 'Risk Capital for Stable Value Tokens,' introducing a new risk-based capital management model for stablecoins and other digital cash tokens. The white paper emphasizes the need for stablecoins to have adequate capital reserve requirements, surpassing the current capital standards established under the Basel banking regulatory framework, to mitigate the unique risks associated with stablecoins, other fiat-equivalent tokens, and their issuers.
The white paper outlines that these unique risks include, but are not limited to, the decline in token prices due to market trading and the prevalence of secondary markets, which can lead to a 'run' on digital tokens caused by excessive sell-offs. Additionally, it highlights operational and technological risks that need to be addressed to ensure the stability and reliability of stablecoins.
