If not managed effectively, liquidity, credit, market, or operational risks—alone or in combination—could affect financial stability, triggering a loss of confidence and run-like behavior. The precise nature of the risk would be driven in part by how the stablecoin is tied to an asset (if at all), the underlying legal arrangements, and the features of the asset itself.
Banks should no longer be rescued using taxpayers’ money. Those who have reaped the benefits, that is the investors and creditors, should pay first if things go wrong. This helps to keep incentives healthy. But let’s go back to the institutional architecture. The Single Resolution Board, or SRB for short, is at the centre of the Single Resolution Mechanism.