Real Vision macroguru and CEO Raul Pal said the recent problems with the Terra UST algorithmic stablcoin could lead to new regulation of stablcoin.
In a new interview with Bankless, the former Goldman Sachs executive said that UST’s recent loss of its peg to the U.S. dollar is integral to most financial markets.
UST is designed to remain pegged to the U.S. dollar through an issue-and-burn mechanism that theoretically allows holders to exchange 1 UST for $1 worth of LUNA.
On May 9, UST lost its peg to the U.S. dollar when cryptocurrency markets sharply corrected and LUNA’s price dropped more than 77% from its all-time high, causing its market capitalization to fall below that of UST.
Pal says the UST situation could be used by regulators as a reason to impose new regulations and restrictions on stablcoin. He added that the crypto industry won’t be happy about it, but it’s probably a necessary stepping stone for the industry.
I think it will lead to a mistake…I’ve always thought that, the government doesn’t need unregulated Stablecoins. They need central bank digital currencies (CBDC), whether private or public sector.
I think there will be some sort of mix. So they will use that as an excuse, and it will benefit Paxos, Circle, and lose to Tether and Terra.
The problem is that if we use, borrow someone else’s currency, we have to play their game whether we like it or not. It’s their currency. So anybody who thinks it’s not Federal Reserve currency just because there’s some algorithm is [crazy].