Key Takeaways:
- Auditing stablecoins will protect consumers —Bankman-Fried.
- UST market cap has plummeted from $19bn on May 9 to $900m.
- ‘Bitcoin has no future as a payments network’
LAGOS (CoinChapter.com) — Following the recent collapse of TerraUSD (UST), Sam Bankman-Fried founder of cryptocurrency exchange FTX has thrown his weight behind demands for stablecoins to be audited.
The FTX founder stated that auditing stablecoins appropriately will bring back transparency and protect consumers in the crypto industry. He further hinted that if stablecoin platforms were audited they will better serve consumers and protect against similar collapse in the future.
Bankman-Fried disclosed this through his official Twitter handle while addressing recent calls for the regulation of stablecoins. Global financial regulators had started proposing different legislations to regulate stablecoins folliwing TerraUSD’s tragic collapse.
The stablecoin which was pegged 1-to-1 to the dollar dropped well below the crucial benchmark, resulting in the total collapse of the asset. Do Kwon, founder of UST issued $1.5 billion in loans to help support the digital currency but failed in resuscitating the token.
Following the crypto market meltdown, which resulted from the stablecoin failure financial regulators have noted that establishing rules for stablecoins will prevent similar incidents from occurring again.
Similarly, the United Kingdom Treasury revealed plans to legalize stablecoins as a payment medium in the country. The move according to the Queen’s Speech will involve plans to regulate stablecoins. The Treasury pointed out that UST’s collapse indicates that not all stablecoins are suitable and reliable as a means of payment.
LUNA/UST Mechanism Very Transparent — Bankman-Fried
Meanwhile, as criticism and speculations regarding the actual cause of the stablecoin collapse continue to emerge, Bankman-Fried has defended Terra’s governing mechanism.
The FTX founder condemned attempt to label Do Kwon’s project as fraudulent, saying LUNA/UST mechanism was actually very transparent. He argued that Kwon never claimed to back UST against the dollar but against bunch of volatile assets. Bankman-Fried said:
“But he didn’t claim that UST was back 1:1 by USD. He claimed, accurately, that it was back by a bunch of volatile assets. It was very publicly clear that those assets might go down, and the rest followed. Again–I don’t want to condone the behavior. But it’s different.”
Currently, UST once pegged to USD was trading at $0.089042 after losing about 90% of its value in a week. TerraUSD’s market cap also plummeted, dropping from around $19 billion on May 9 to about $900 million at press time.
Bitcoin Has No Future As Payments Network, says FTX founder
In a similar development, Bankman-Fried has also come under fire recently for stating that Bitcoin has no future as a payments network.
The FTX CEO argued that Bitcoin because of its high environmental costs, might lose its place as the leading token.
Additionally, the 33-year-old crypto billionaire, said the proof of work system of validating blockchain transactions, which underpins bitcoin, was not capable of scaling up to cope with the millions of transactions that would be needed to make the cryptocurrency an effective means of payment.
