**VC Jeremy Kranz Warns Stablecoins Carry Surveillance and Control Risks Similar to CBDCs**
Privately-issued stablecoins are coming under heightened scrutiny after venture capital executive Jeremy Kranz highlighted their potential risks, likening them to central bank digital currencies (CBDCs). Kranz, founder and managing partner of Sentinel Global, characterized these digital assets as “central business digital currencies,” cautioning that they offer comparable levels of surveillance, control, and vulnerability — while also introducing private sector risks. His remarks arrive amid stablecoins surpassing a $300 billion market capitalization.
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### Stablecoins and the Risk of Centralized Control
Despite being issued by private firms, stablecoins often resemble government-issued CBDCs in terms of user control, Kranz explained. Large financial institutions can freeze or block access to stablecoin funds under regulations such as the Patriot Act.
“If JP Morgan issued a dollar stablecoin and controlled it through the Patriot Act, they can freeze your money and unbank you,” Kranz warned. He emphasized that these digital assets incorporate similar backdoors, surveillance tools, and programmable features — whether governed by a corporation or a central authority.
This degree of control, Kranz argued, poses serious challenges to financial freedom. Although stablecoins are often marketed as decentralized or user-focused, they frequently involve centralized authority over assets, echoing traditional banks or government institutions.
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### Redemption Pressures and the Risk of “Bank Runs”
Stablecoin issuers who back tokens with overcollateralized holdings, such as cash and short-term U.S. government securities, can face significant pressure if large numbers of users redeem their tokens simultaneously. Kranz likened such situations to a “bank run,” where liquidity may rapidly evaporate.
Popular stablecoins like USDC strive to maintain a 1:1 dollar peg. However, excessive redemption demands exceeding available collateral could lead to delays or potential losses for users.
“They are vulnerable if too many holders try to redeem at the same time,” Kranz noted.
Algorithmic and synthetic stablecoins carry different types of risks. These tokens maintain their peg through code or sophisticated market strategies but remain susceptible to de-pegging triggered by market volatility, technical faults, or abrupt crypto market crashes.
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### Stablecoin Bill Sparks Regulatory Concerns
Interest in stablecoins has surged following the passage of the GENIUS stablecoin bill in the United States. The legislation aims to regulate privately-issued stablecoins but has attracted criticism from some lawmakers.
U.S. Representative Marjorie Taylor Greene described the bill as a “CBDC Trojan Horse.” In a July post on X, she stated, “This bill regulates stablecoins and provides for the backdoor central bank digital currency.” Greene warned it could pave the way for a cashless society where money becomes programmable and subject to extensive control.
The bill has intensified debates around digital currency regulation and privacy. While some view it as a necessary safeguard, others fear it increases centralized oversight at the expense of user freedoms.
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### Rapid Innovation Brings Both Opportunity and Risk
According to DeFiLlama data, the total stablecoin market capitalization surpassed $300 billion in October. Kranz highlighted the rapid and unpredictable pace of innovation in crypto and tokenization, comparing it to experiencing “10 black swan events” simultaneously.
He acknowledged that while such technology has the potential to create innovative financial tools, it also bears the risk of misuse.
“Technology is neutral,” Kranz said, “but outcomes depend on who controls it and how it’s used.”
Kranz advised investors to carefully read the fine print and fully understand the inherent risks before holding or using stablecoins. He underscored that regardless of whether stablecoins are centralized or algorithmic, they are not immune to failure, market volatility, or regulatory intervention.
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**Stay informed and exercise caution when engaging with stablecoins in today’s rapidly evolving crypto landscape.**
https://coincentral.com/stablecoins-are-central-business-digital-currencies-says-vc-founder/
