TerraUSD stablecoin crash is a failure of collateral, not product

In defense of stablecoins
Miles Jennings, general counsel and head of decentralisation at venture capital fund a16z crypto, part of Andreessen Horowitz

Crypto critics are using the collapse of dollar-pegged virtual currency TerraUSD as ammunition to attack stablecoins and the crypto industry as a whole.

The attack on them is off the mark. Putting aside that TerraUSD should never have been considered a “stablecoin”, the real issue has little to do with computer code and everything to do with a concept as old as finance itself: collateralisation or the use of assets to underpin value.

Stablecoins can, indeed, be stable if they manage their collateral properly. For “centralised” stablecoins backed by real-world assets, the liquidity and transparency of reserves may be low, so collateral should include less volatile assets like cash, treasuries and bonds. Regulators can establish parameters regarding these types of collateral and require regular audits.

The full article is available at https://www.ft.com/content/39681aa2-aa01-4d60-b399-8ecb236c627e

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