Circle proposes new capital risk framework for stablecoins

Circle recently released a white paper titled "Risk Capital for Stable Value Tokens" that proposes a new risk-based capital management model for stablecoins and other digital cash tokens. The authors of the white paper believe that stablecoins require adequate capital reserve requirements that exceed the current capital standards established under the Basel banking regulatory framework to mitigate risks unique to stablecoins, other legal equivalent tokens, and their issuers. According to the authors, these unique risks include, but are not limited to, a decline in token prices due to market trading and the prevalence of secondary markets, followed by a "run" on digital tokens due to excessive selling, operational risks, and technical risks.