Following recent concerns about Terra’s algorithmic stablecoin UST, stablecoin regulation may change.
The recent loss of the UST’s peg to the US dollar, according to the former Goldman Sachs executive, is typical of most financial markets.
The UST is linked to the USD through the mint and burn process, allowing holders to exchange 1 UST for 1 LUNA at any time. On April 9, the UST lost its peg to the US dollar, and the LUNA price plunged about 77% from its all-time high, resulting in a lower market value than the UST.
“It will only take $3 billion to liquidate…” I’m not sure what impact this will have on the Anchorage Protocol. Earth, I’m not sure. It’s a complex scenario, so I’m not sure what to say. It’s hard to deconstruct the Ethereum ecosystem because it’s so complicated; no one knows where the fault lines are, who has power and who doesn’t.
Markets like this do what markets do: they identify the weaker hands and move money into the stronger hands by force…
Mr. Pal believes that the UST scenario could be used to justify more laws and restrictions on stablecoins. Although many in the industry may be critical of the stablecoin legislation, he believes it is essential to the future of the industry.
“I think it will gravitate towards uncontrolled stablecoins, which is something I have long suspected. Central Bank Digital Currencies (CBDCs), which can be private or public, are sought. I anticipate a mix. That is not right. Consequently, they will use this as an excuse, which will be good for Paxos and Circle, but detrimental to the interests of Tether and Terra.
In this case, we are forced to play along with the person who provided us with the cash or lent it to us. It’s his money, after all. Anyone who believes our algorithm is not the Federal Reserve’s money is [crazy].”
