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Counterparty and Collateral Risk: When a stablecoin is backed by collateral involving a third party maintaining this collateral, this carries additional risks. Specifically, if the third party were to become insolvent or fail, you may lose some or all your investment linked to the collateral the third party provided.
Redemption Risk: This risk refers to the possibility that a stablecoin's ability to be redeemed for the underlying collateral may not be as anticipated during market fluctuations or operational issues.
Exchange Rate Fluctuations: Stablecoins, often denominated in US Dollars, expose UK investors to fluctuations in the USD exchange rate.
General Stablecoin Risk: Stablecoins attempt to link their value to a specific fiat currency or index. The pegs in stablecoins have historically been challenged, resulting in potential/realised losses for holders. Stablecoins depend on complex algorithmic outputs, reserves that may not be demonstrably proven or accessible, or redemption mechanisms that do not perform as expected.