Raoul Pal, CEO of Macro Guru and Real Vision, says that recent problems with Terras are algorithmic stablecoin UST could lead to new stablecoin regulation.
In a new interview with Bankless, the former Goldman Sachs executive says the recent loss of UST’s peg to the US dollar (USD) is a staple of most financial markets.
UST is designed to remain pegged to USD through a minting and burning mechanism that theoretically allows holders to redeem 1 UST for $1 worth of LUNA. On April 9th, UST lost its peg to USD as crypto markets corrected sharply and LUNA’s price from its all-time high fell by over 77%, making his market capitalization below that of UST.
“There’s only $3 billion to liquidate… Does that change the Anchor Protocol, I don’t know what the ramifications are. Maybe there are more knock off effects Avalanche, I don’t know, it’s a very complicated ecosystem Terra so I don’t know it inside out. Similar to, try taking those apart Ethereum Ecosystem, it’s immensely complicated, no one really knows where the fault lines are, who has leverage and who doesn’t.
Markets like this, that’s what they do, they find the weakest hands and drive it into the strongest hands, and that’s just the way of the world…”
Pal says the UST situation could be used as justification by regulators to introduce new rules and restrictions on stablecoins. He says that while many in the industry will lament stablecoin regulations, it’s likely a necessary stepping stone to space.
“I think it’s headed towards – and I’ve always thought so – nobody, not the government, wants unregulated stablecoins. They want central bank digital currencies (CBDCs), whether their private sector or government sector. I think there will be a mix. Nobody wants that. So they’re going to use that as an excuse, and it’s probably good for people like Paxos, it’s probably good for people like Circle and it’s not so good for people like tether and earth.
The problem is, when we use or borrow someone else’s currency, we have to play their game whether we like it or not. It’s their currency. So anyone who thinks it’s not the Federal Reserve currency just because we have some kind of algorithm, it is [crazy].”
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Source: Crypto News Deutsch