As described in more detail in this article, risk is defined as the possibility that the actual gains on an investment will differ from the expected returns.
Risk also includes the possibility of losing part or all of an original investment.
In this same article, cryptocurrency-specific risks are also covered (include those non-financial risks seemingly particular to cryptocurrency-related services).
Below, we present a closer look at different types of risk that apply especially to so-called stablecoins. This includes risks related to reserve-backed or pegged stablecoins (cryptocurrencies whose value is directly linked to the value of another asset, such as a fiat currency or a commodity), as well as risks related to algorithmic (or seigniorage-style) stablecoins.
Important: the Brighty App only utilises fiat-currency backed stablecoins for its earning products, thereby significantly reducing the overall level of risk.
Risks associated with stablecoins:
Counterparty risk: For collateralized stablecoins, the issuer or custodian holding the underlying assets may fail to meet their obligations, leading to a loss of confidence and potential devaluation of the stablecoin
Regulatory risk: stablecoins may face regulatory scrutiny due to concerns about money laundering, tax evasion, or circumventing capital controls. This could lead to new regulations that may impact the adoption or operation of stablecoins
Collateral volatility: For crypto-collateralized stablecoins, the volatility of the underlying cryptocurrencies could lead to fluctuations in the stablecoin's value or even a collapse of the peg (a so-called "de-pegging").
Technical Risk: the smart contracts or algorithms used to manage stablecoins may have vulnerabilities, potentially leading to security breaches or failures in maintaining the link the asset.
At Brighty, we understand the importance of risk management in the financial industry, and we take our responsibility to our clients seriously. Our rigorous risk management practices are designed to ensure that our clients' assets are safe and secure, and we will continue to adapt and improve our processes to meet the ever-evolving demands of the financial industry.