FTX cryptocurrency exchange founder Sam Bankman-Fried is weighing on the future of stablecoins after the two top cryptocurrencies suffered massive losses this week.
Latest Bankman Pride Tweet After Luna Foundation Guard’s TerraUSD (UST) lost the US Dollar (USD) peg and Terra (LUNA) collapsed, how the so-called stablecoin should split and have a better definition.
“The good thing someone recently mentioned: Actually, ‘stablecoin’ is used in many different senses.
One thing that could mean is a ‘stablecoin backed 1:1 in US dollars in US bank accounts’.
This is what the current draft US regulation is looking for as a first step in licensing.”
FTX CEO at the time Mention Other stablecoin tiers that are not strictly backed by dollar reserves and are vulnerable to volatility and risk because of their mix of assets and liabilities.
“The other is ‘liquid debt assets, government bonds, and stablecoins backed by more than 1:1 in USD’. The price risk is not zero, but it’s usually very close to $1 because it’s redeemable.
for example [Tether] USDT stayed within a few percent of $1 during this crash [I’m] $1b+ has been successfully repaid.
The third is ‘stablecoins backed >= 1:1 by highly volatile assets’.
They are ‘algorithmic’ stablecoins. If there is a basic crash, it can go down. A lot of. Example: UST.”
As for the solution, Bankman-Fried proposal It applies its own definition to other versions of the version that currently fall under the broader stablecoin term umbrella.
“Really we shouldn’t use the same word for all of this. What we call ‘algorithmic stablecoins’ are not really stable in the same way as fiat-backed stablecoins.
They are like structured products and require a rise to justify the risk.
This may seem insignificant to those of cryptocurrencies, as they already know that algorithmic stablecoins are quite different from fiat currencies. However, those messages are often lost in the policy space. We have to be clear about that.”
When asked if FTX can help LUNA as Bankman-Fried will gain access to the managed keys of the SushiSwap (SUSHI) decentralized exchange (DEX) in September 2020, the CEO said: say That’s very unlikely.
“This can be difficult. The practical and honest answer is that perhaps UST or LUNA should go to zero (or both).
There is no way to save both. (And it’s unclear at this time if there’s a way to save the peg of UST at the expense of LUNA.)”
At the time of writing, TerraUSD is down 41.7% and is currently valued at $0.49.
Meanwhile, Terra collapsed, dropping from above $80 a week ago to $1 by May 11th. LUNA is down 99.03% that day and is priced at $0.006645 at the time of writing.
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