The National Institute of Standards and Technology (NIST), a non-regulatory agency of the United States Department of Commerce, has unveiled an initial public draft emphasising on the various security considerations with regard to architecture and implementation of stablecoins, as reported by Cointelegraph.
According to Cointelegraph, on the basis of a study done on top 20 stablecoins over the past year, NIST made the discovery that the top five coins which retained their peg represented 87% of the total top 20 market capitalisation. Out of the group, the top five stablecoins which were able to maintain their pegs based on market capitalisation were Tether, USD Coin, Binance USD, Dai, Frax, among others. Certain security concerns were upheld by the report which included unauthorised or arbitrary mining, collateral theft, smart contract vulnerabilities, data oracles, exploitation of the underlying blockchain, among others. NIST was reportedly suspicious of its creators, maintainers, and managers of stablecoin systems as they could have used their status to be deceptive or malicious towards investors and holders.
“This security analysis found that two stablecoins that function almost identically in third-party markets and enable the buying and selling of goods with coins at a pegged price can have vastly different risk profiles,” NIST stated.
On the basis of information by Cointelegraph, NIST emphasised on the vulnerability of centralised finance (CeFi) institutions towards trust issues due to reliance on human trustworthiness while decentralised finance (DeFi) is vulnerable to security issues on account of increasing smart contract code complexity and critical functionality.
“The motions are premature and should be denied until after the examiner report is filed. First, the withdrawal motion seeks to distribute funds to one group of creditors in advance of an understanding of the debtors’ cryptocurrency holdings,” William Harrington, US trustee, DOJ, noted. Harrington also mentioned that the motion shouldn’t be considered until the filing of the examiner report.
(With insights from Cointelegraph)
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