The UST tragedy means death for algorithmic stablecoins, according to a co-founder of Tether

UST tragedy means death for algorithmic stablecoins

According to CNBC, Tether (USDT) co-founder Reeve Collins believes that the death of UST might be the spark for the demise of other algorithmic stablecoins.

Collins made the comment to the news outlet while speaking at the World Economic Forum in Davos, Switzerland. He went on to say that the fall was not unexpected.

“It’s an algorithmic-backed, stablecoin. So it’s just a bunch of smart people trying to figure out how to peg something to the dollar,” Collin said.

Many users have cashed out UST in recent months after realizing that stablecoin was not stable, according to Collins. As a result, the stablecoin fell in value, dragging the entire crypto market down with it.

Collins feels algorithmic stablecoins haven’t seen the worst of it yet, despite the present negative crypto market. Other algorithmic stablecoins, he believes, will soon follow UST, bringing the coin class to an end.

Jeremy Allaire, the CEO of USD Coin (USDC) issuer Circle, feels the age of algorithmic stablecoins isn’t over yet.

“I’ve compared algorithmic stable coins to the Fountain of Youth or the Holy Grail. Others have referred to it as financial alchemy,” he added.

To that end, he believes that financial alchemists will continue their quest for the Holy Grail of a steady value.

Because of the concerns, Allaire believes authorities will prohibit algorithmic stablecoins from interacting with the market and financial system.

Following the UST disaster, financial watchdogs and legislators have been increasingly demanding for immediate stablecoin regulation. The British government, for example, has suggested legal changes to better control stablecoin issuers.

The government stated in a May 31 consultation document that it is critical to guarantee that current legal frameworks can effectively help manage the risks presented by the probable systemic failure of digital settlement asset providers.

Aside from the United Kingdom, the United States, according to Hester Peirce of the Securities Exchange Commission, may speed up the pace in terms of stablecoin adoption. The UST tragedy, according to Peirce, will prompt regulators to rapidly rein in stablecoins.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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