Circle, the issuer of the USDC stablecoin, has released a white paper entitled "Risk-Based Capital for Stable Value Tokens," proposing a new risk-based capital management model for stablecoins and other digital cash tokens.The white paper argues that stablecoins need to go beyond the existing Basel banking regulatory framework's requirements for adequate capital reserves to mitigate the unique risks of stablecoins, other fiat-equivalent tokens, and their issuers.These risks include shortages in token prices due to market trading, "runs" caused by excessive selling, operational risks, and technological risks. To address these challenges, Circle has proposed a "Token Capital Adequacy Framework" (TCAF).The framework utilizes a dynamic risk-sensitive model, starting from stress testing reserves and stakeholder feedback, while considering technical risks such as blockchain network performance and network security.TCAF aims to differentiate between emerging "persistent" risk factors and successfully mitigated "disappearing" risks, simplify risk management processes, provide risk management standards across jurisdictions and institutions, and incentivize and hold accountable to mitigate negative risk externalities.

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