Stablecoins' Dirty Secret: Why Your Crypto Dreams Are Built on Sand

The original and inarguable promise of crypto was decentralization and freedom. We lost sight of that dream and exchanged it for something else. A façade that appears solid even if it’s a digital optical illusion shimmering on top of a fintech swamp crater. I'm talking about stablecoins.

Are Your "Safe" Coins Truly Safe?

Let’s be frank – the name alone is a marketing triumph. "Stable." It evokes visions of dry land, a calm bay in the stormy waters of Bitcoin and Ethereum. Look a little deeper, and you’ll see that a lot of these so-called stablecoins aren’t as stable as they claim.

Think of it this way. Remember the 1997 Asian Financial Crisis? Currencies collapsed, businesses went bankrupted, and lives were destroyed. It began with the opaqueness and excessive dependence on dubious financial weapons. Now, fast forward to today. Instead, we’re told that stablecoins aren’t like that, they’re backed by highly liquid reserves that guarantee they always equal one dollar. But just how well do you know where the stuff behind them is coming from? Are they truly 1:1 backed by cold, hard USD sitting in a vault? Or are they living on a thin cushion of commercial paper, bonds and… who knows what?

That’s the dirty secret. The lack of transparency. We're putting our hard-earned money – often life savings, especially here where access to traditional banking can be limited – into these digital tokens, trusting that they're as safe as the dollar in our pocket. Are we really sure?

Tether's Shadow: A Systemic Risk

Let's call out the elephant in the room: Tether (USDT). It’s the largest of all stablecoins, the crowned monarch of the stablecoin mountain. And its size is the problem. Second, the crypto ecosystem is closely connected to many other industries. If it were to fall through, the consequences would be dire, particularly for developing economies in Southeast Asia such as ours.

Imagine a domino effect. USDT loses its peg. Panic selling ensues. Other crypto assets plummet. Exchanges freeze withdrawals. People lose everything. It’s more than losing out on a few speculative gains. That would be a drastic mistake, costing the nation dearly to erase the savings of common Americans to whom we gave a safe-harbor.

And what of USDC, DAI, USDe, USD1, FDUSD. They all have different factors that make them “stable,” but do you really know how each of them operate individually. Or are you simply taking your chances from influencers and YouTube videos?

I'm not saying all stablecoins are scams. I’m not saying that we need to do away with all of this. It’s time to start calling for more transparency from the entities with coins being issued. That’s why we’re calling on regulators to intervene and fill the regulatory gaps and oversee this technology. If not, we’re reaping what we sow—sleepwalking into another financial calamity.

Why am I worried about Southeast Asia so much? Because we've seen this movie before. And we’re all too familiar with the consequences when these opaque financial systems collapse. As is the case worldwide, we’re usually first in the line of fire from global financial shocks.

Southeast Asia: The Canary in the Coal Mine

Think about it: Many people in our region are new to crypto. They’re attracted to the crypto ecosystem through stablecoins, which appear to be more stable than regular cryptocurrencies. Few people have the financial literacy required to understand the intricacies of managing a reserve. They find it hard to even understand the risk of systemic contagion. They’re trusting in something that they believe is protective – but really isn’t.

This is where the outrage comes in. A fundamentally unjust practice is to allow these people to become exposed to that level of risk without adequate education and regulation. We must look out for the most vulnerable among us and see that the great promise of crypto doesn’t become their worst nightmare.

Despite tether’s charm, the average investor would be much more secure knowing that Tether and USDC are backed by real security. Don’t forget to be careful beforehand to avoid rash decisions. Do your own research. Don't blindly trust anyone, including me.

Nonetheless, crypto can be a key and powerful enabler for improving financial inclusion and innovation. It’s built on a strong foundation of transparency, accountability, and responsible regulation. As it stands, much of the current stablecoin market seems to be built on quicksand.

It's time we demand better. It's time we protect ourselves. It's time we wake up.

It's time we demand better. It's time we protect ourselves. It's time we wake up.