Can a cryptocurrency break the buck?

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Certain cryptocurrencies known as stablecoins are today’s economic equivalent of money-market funds, and in some cases their practices should have us worried that they could break the buck, creating significant damage in the broader crypto market.

One such stablecoin is Tether. With a market capitalization close to $60 billion, it is almost as big as the Reserve Fund was in 2008. Each Tether token is pegged to be equivalent to $1. But, as with the Reserve Primary Fund, the true value of those tokens depends on the market value of Tether’s reserves — the portfolio of investments made with the fiat currency it receives.

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Tether recently disclosed that as of March 31, only 8% of its assets were in cash, Treasury bills and “reverse repo notes.” Almost 50% was in commercial…

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