The National Institute of Standards and Technology (NIST), a non-regulatory agency of the U.S. Department of Commerce, has published an initial public draft highlighting the various security issues surrounding the architecture and implementation of a stablecoin.

Based on a study of the top 20 stablecoins over the past year, NIST found that the top five connected coins account for 87% of the total market capitalization of the top 20 coins. By market capitalization, it managed to maintain its positions listed below.

Coincidentally, all five coins were pegged to the US dollar and had an average minimum value of $0.934 (-0.66%) and a minimum value of $0.971 (-1.29%) throughout the study.

The National Institute of Standards and Technology (NIST) also drew attention to the death spiral of TerraUSD (UST), the third largest stablecoin by market capitalization at the time of the study, which lost its peg in May 2022. Some of the security issues discussed in the report include unauthorized release or arbitrary security. Theft and vulnerabilities in smart contracts, oracle data and exploitation of the main blockchain.

Given the credibility of stablecoin issuers, NIST suspects that creators, maintainers, and maintainers of stablecoin systems may be using their privileged position to deceive investors and holders. Summing up, NIST stated:

“This security analysis showed that two stablecoins that perform almost identically on third-party markets and are able to buy and sell goods in fixed rate coins can have significantly different risk profiles.”
According to NIST, decentralized finance (CeFi) architectures are more prone to trust issues due to greater reliance on human trust, while decentralized finance (DeFi) architectures are typically more prone to security issues due to increased smart contract code complexity and critical functionality. . .

Related: Stablecoins have lost $38 billion since May as revenue plummets and projects collapse

On October 3, the Department of Justice (DOJ) objected to Celsius’ proposal to resume withdrawals for select clients and sell its stablecoin holdings. According to U.S. Department of Justice custodian William Harrington:

“The proposals are premature and should be rejected even after the expert’s report has been submitted. First, the withdrawal movement aims to impulsively distribute funds among a group of creditors before the debtors’ cryptocurrency assets are fully explored.”
Concluding the discussion, Harrington said that the offer should not be considered until an expert’s report is available, noting that “any distribution or sale to interested parties should be delayed and the trustee in the United States and the court will be able to decide.” on the amount of interest-bearing liabilities, claims on them, their assets, etc. “The debtors really intend to pay them to their creditors.”

Source: CoinTelegraph

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