The director of capital markets at the International Monetary Fund (IMF) believes there could be more failures of “coin offerings”, including algorithmic stablecoins, amid the current crypto winter..
In an interview with Yahoo Finance on July 27, Tobias Adrian, director of money and capital markets at the IMF, stated that there could be more failures of some coin offerings, in particular algorithmic stablecoins:
“There could be more selling, both in crypto and risk markets, just like in equities… There could be more failures of some of the coin offerings; in particular, some of the algorithmic stablecoins have been hit the hardest, and there are others that could fail.”
The IMF director also noted on Wednesday that there were “some vulnerabilities” of certain fiat-backed stablecoins, referencing Tether.which he says are not “backed one-for-one” with the US dollar (USD).
Adrian also mentioned that stablecoins need a “global regulatory approach” to better protect investors.. Adrian stated that while it would be difficult to assess whether each cryptocurrency constitutes a security or not, regulators should first focus on ensuring that crypto exchanges and wallet providers do their due diligence on coins before trading them.
Terra USD (UST), now known as TerraClassicUSD, is the most notable algorithmic stablecoin to have lost its price peg. Its crash wiped $40 billion off the market in May, and it is currently priced at $0.04.
Tron’s algorithmic stablecoin USDD also fell to as low as $0.91 in June, though it recovered its price after $700 million USDC was added to its reserves..
Deus Finance’s stablecoin DEI also crashed in May and is currently trading at $0.18.
Earlier this month, the founder of Frax Finance, the company behind the FRAX stablecoin, Sam Kazemian, told Cointelegraph that he thinks purely algorithmic stablecoins “just don’t work”.
Instead, Kazemian stated that “on-chain decentralized stablecoins […] they need to have a guarantee [tradicional]”.
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