Luna, the sister cryptocurrency of the controversial stablecoin TerraUSD, has fallen to $ 0. The collapse of the algorithm’s stablecoin TerraUSD raises questions about the future survival of similar crypto assets.
Dunkit Wood | Getty Images News | Getty Images
Algorithm like stablecoin terraUSDAlthough it collapsed and sent a shock wave through the crypto market, it is unlikely to survive, the co-founder of the digital currency tether told CNBC.
Stablecoin is a type of cryptocurrency that is usually fixed to real-world assets. TerraUSD or UST is the algorithm’s stablecoin, USD..
Stablecoins like tethers and USD coins are backed by real-world assets such as fiat currencies and government bonds to maintain dollar pegs, UST was managed by an algorithm..
UST lost Dolpegg, which also led to the sale of its sister tokens Luna crashed to $ 0..
The blunder led to a warning that the algorithm Stablecoin may have no future.
“It’s a shame that we lost money, but it’s not a surprise. It’s an algorithm-backed stablecoin, so it’s just a bunch of clever people trying to find a way to nail something to the dollar. “Reeve Collins, co-founder of digital token company BLOCKv, told CNBC last week at the World Economic Forum in Davos, Switzerland.
“And many have withdrawn money in the last few months because they realized it wasn’t sustainable, so the crash had a cascading effect, and it’s probably most Argos table coins. Will be the end of. “
Collins is also the co-founder of Tether, which is not Stablecoin in the algorithm. However, tether issuers claim to be backed by cash, US Treasuries and corporate bonds. In the crypto market turmoil last month, Tether also temporarily lost its dollar peg before regaining it..
Jeremy Allaire, CEO of Circle, one of the companies behind the issuance of USDC Stablecoin, said he believes people will continue to work on algorithmic stablecoin.
“I compared the stable coins of the algorithm to the Fountain of Youth and the Holy Grail. Others call it financial alchemy. Therefore, a financial alchemist who works on magical potions to create these things. Will continue to exist, and … finding a stable value holy grail, the digital currency of the algorithm, so I’m completely looking forward to its continued pursuit, “Allaire told CNBC last week. rice field.
“Now, what happens with the regulations that surround it is another matter. Is there a clear line about what can interact with the market? What can interact with the financial system … is embedded.” Said.
The Critopo industry expects more restrictions on Stablecoin, especially after the collapse of terraUSD. Bertrand Perez, CEO of the Web3 Foundation and former director of the Facebook-backed Diem Stablecoin project, expects regulators to demand that such cryptocurrencies be backed by real assets.
“Therefore, once stablecoin is clearly regulated, the basic rule of regulation is to have a clear reserve with a strong set of assets and undergo regular audits of those reserves. I think it will be, “Perez told CNBC last week.
“Therefore, regular audit firms come to make sure they have the right reserves and have the right processes and measures to face run-on-the-bank runs and other, for example, negative market conditions. You can. Not only when everything goes well, but your reserves are really safe. “