As of now, Stablecoin lending isn’t regulated.
I like to look at history and ask myself: what has happened to money markets in the past? What has happened to mortgage backed securities? Both were/are considered very safe assets, akin to cash (money markets) or very safe bonds.
Come 2008, which showed that a lack of regulation in both sectors actually came with a pretty decent chunk of risk.
Money Markets have shown to be vulnerable to a run for the bank: if too many people loose faith in the system and try to redeem their money, the provider has to come up with liquidity, which they may not have: Money Market Mayhem: The Reserve Fund Meltdown
Mortgage backed securities are at the center of the subprime crisis, which has shown what happens when an asset that is presented as safe is actually exposed to more risk than displayed (credit risk, in the case of subprimes).
So, in order to lend stablecoins, you have to:
- Trust the lending platform not to go bankrupt.
- Trust it is lending the coins to people who won’t default all at once.
- Trust the stablecoin to stay liquid and worth very close to 1 Whatever-fiat-currency-it-is-linked-to.
- Be ok with the idea of your capital not returning to you.
In a non-regulated environment.
Each of us should make their own risk assessment but, for me, we’ve built regulations specifically because we have experienced crises where these specific risks have arised in assets that were previously not regulated. If there’s a fuse on my electrical network because we’ve learned from the past that people can get electrocuted without those, I like my electrical network to have fuses. But we can take the risk, in most cases, everything goes fine. It’s just important to stop and ponder that, every once in a while, someone gets electrocuted because they’ve decided that using an electrical network without fuses was totally fine.