Term stablecoin is ‘problematic’ says leading European Central Bank figure
12:32, 29 November 2022
The term stablecoin is “problematic” according to a member of the European Central Bank’s supervisory board , Elizabeth McCaul
McCaul made this claim at the Financial Times Crypto and Digital Assets Summit: Winter Edition on Monday 28 November, adding that “the recent market has pointed this out”.
In May 2022, the stablecoin terraUSD (UST) lost its peg to the US dollar, which resulted in the price crash of its sister token terra (LUNA).
Teana Baker-Taylor, vice-president of policy and regulatory strategy at Circle, the pioneering peer-to-peer payments technology company behind the stablecoin USD Coin (USDC) made similar remarks at the FT event.
Baker-Taylor said: “the term stablecoin is a bad one”, adding that there were tokens that claimed to be stable when they were not.
Marieka Flament, CEO of NEAR Foundation, the company behind the crypto NEAR Protocol (NEAR) also said: “stablecoins bring up the question, what is money?”
USDC to USD
Collapse of UST could hasten US crypto regulation
Jeremy Allaire, CEO of Circle at the time of the depegging of UST, said the stablecoin’s collapse could lead to the acceleration of US crypto regulation.
Allaire, an American, who founded Circle in 2013, told Yahoo Finance “When you have a major blow up, it’s certainly going to accelerate the need for Congress to act and establish some perimeters around who and what is involved in operating a dollar stablecoin in the USA.
“I think what has unfolded with these unstable stablecoins, such as UST, was entirely predictable.”
Allaire added that he felt there were several “very viable legislative proposals” that the federal government had discussed and could be used to govern the crypto industry.
Regardless of regulation arriving, Allaire said he felt that the incident had provided a death blow to retail crypto investors and the industry as a whole, and the need for regulation had intensified.
Algorithmic stablecoins
Also speaking at the FT event, Jakob Palmstierna CEO of GSR, which provides spot and non-linear liquidity in digital assets said: “No algorithmic stablecoin has held its peg”.
UST was the biggest algorithmic stablecoin by market value. In contrast to its rival stablecoin, USDC which is backed by the dollar, UST was designed to maintain its peg to the US dollar through a combination of mathematical equations and active trading. Investors could swap UST regardless of its value for $1 of LUNA, the theory being that trade in UST would keep it at $1 or at least close to the value. However, UST still lost its peg.
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