{"id":472459,"date":"2022-07-10T05:20:00","date_gmt":"2022-07-10T02:20:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/after-terras-fall-to-earth-get-ready-for-the-stablecoin-era\/"},"modified":"2022-07-10T05:20:00","modified_gmt":"2022-07-10T02:20:00","slug":"after-terras-fall-to-earth-get-ready-for-the-stablecoin-era","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/after-terras-fall-to-earth-get-ready-for-the-stablecoin-era\/","title":{"rendered":"# After Terra\u2019s fall to Earth, get ready for the stablecoin era"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3707b5a5e7f\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3707b5a5e7f\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/after-terras-fall-to-earth-get-ready-for-the-stablecoin-era\/#%E2%80%9D_After_Terras_fall_to_Earth_get_ready_for_the_stablecoin_era_%E2%80%9C\" >&#8221; After Terra\u2019s fall to Earth, get ready for the stablecoin era &#8220;<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/after-terras-fall-to-earth-get-ready-for-the-stablecoin-era\/#Not_all_stablecoins_were_born_equal\" >Not all stablecoins were born equal<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/after-terras-fall-to-earth-get-ready-for-the-stablecoin-era\/#Regulators_were_slow_to_react%E2%80%A6\" >Regulators were slow to react\u2026<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/after-terras-fall-to-earth-get-ready-for-the-stablecoin-era\/#%E2%80%A6and_are_missing_the_point\" >\u2026and are missing the point<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/buradabiliyorum.com\/en\/after-terras-fall-to-earth-get-ready-for-the-stablecoin-era\/#Darkest_before_the_dawn\" >Darkest before the dawn<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_After_Terras_fall_to_Earth_get_ready_for_the_stablecoin_era_%E2%80%9C\"><\/span>&#8221; After Terra\u2019s fall to Earth, get ready for the stablecoin era &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<div class=\"post-content\" data-v-2a0745c6>Stablecoins were supposed to be the boring uncle of the crypto world \u2014 safe, sensible and dull. They\u2019re probably not what Satoshi Nakamoto had in mind, but they\u2019re supposed to be a reassuring haven of calm and utility away from the turbulence of pure-play cryptocurrencies.<\/p>\n<p>With values pegged to fiat currencies, stablecoins were intended to be useful rather than to offer get-rich-quick schemes. They play an important role in the cryptocurrency ecosystem by providing a safer place to store capital without having to cash out entirely, and allowing assets to be denominated in fiat currencies rather than volatile tokens.<\/p>\n<p>However, events in May demonstrated that crypto stability is still elusive. With governments slow to react, Terra\u2019s LUNA token \u2014 which has since been renamed Luna Classic (LUNC) \u2014 dropped to close to zero in value, wiping out $60 billion along the way. The obvious conclusion would be that the stablecoin experiment has failed. But I believe Terra\u2019s fall to Earth is the precursor to a new era where stablecoins will become established, accepted and beneficial components of the global economic system. And the regulation that is only now dropping into place already looks well past its sell-by date.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-07\/7e8e991c-d3a3-43e1-b441-94d5d40d5157.png\"><\/figure>\n<h2><span class=\"ez-toc-section\" id=\"Not_all_stablecoins_were_born_equal\"><\/span>Not all stablecoins were born equal<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>If that seems unlikely right now, the failure of a few stablecoins does not write off the entire concept. Other stablecoins have been constructed on solid ground and are performing as expected.<\/p>\n<p>What\u2019s h<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ening is a clearout of the algorithmic stablecoins. These are coins that were never fit for purpose because they were built on insecure foundations. There were always critics: Some called out Terra as a Ponzi scheme and argued that it, and other algorithmics, would only hold value if more and more people bought them.<\/p>\n<p>Algorithmic stablecoins are unregulated and not backed by equivalent amounts of the underlying fiat currency \u2014 or by anything, for that matter. Instead, they deploy smart contracts to create or destroy the available supply of tokens to adjust the price. It\u2019s a system that worked, backed up by an artificially high interest-paying mechanism called Anchor, while enough people believed in it. Once that trust started to evaporate in early May, the flood gates opened in a classic, old-world bank run.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>What can other algorithmic stablecoins learn from Terra\u2019s crash?<\/em><\/strong><\/p>\n<p>But there are other classes of stablecoin that are backed by assets, including fiat currencies. Tether (USDT), the world\u2019s biggest stablecoin by market capitalization, has <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/tether.to\/en\/transparency\/#reports\">published<\/a> its asset register to demonstrate that its token is fully backed by assets held in a reserve. Tether\u2019s value against the dollar has remained consistent, including through the current turmoil, with only a relatively minor blip on May 12 when it declined in value to $0.97.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-07\/03c311f1-0386-4aa7-8679-46672b3d9e92.jpg\"><\/figure>\n<p>Circle CEO Jeremy Allaire wrote in his <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">Twitter<\/a> account that USD Coin (USDC), the second-largest stablecoin by value, is entirely backed with different assets. <\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">2\/ The USDC reserve is held entirely in cash and short-dated U.S. government obligations, consisting of U.S. Treasuries with maturities of 3 months or less<\/p>\n<p>\u2014 Jeremy Allaire (@jerallaire) <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/jerallaire\/status\/1525228145439285249?ref_src=twsrc%5Etfw\">May 13, 2022<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>USDC has performed even better than Tether at its primary task: tracking the U.S. dollar.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Regulators_were_slow_to_react%E2%80%A6\"><\/span>Regulators were slow to react\u2026<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Regulators were stepping up their focus on stablecoins before the Terra meltdown, though perhaps a little late, given what has happened. In the United States, President Joe Biden signed his Executive Order on Ensuring Responsible Development of Digital Assets on March 9 \u2014 to an unexpected chorus of approval from the broader crypto industry.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-07\/f6ca834b-36a6-4bf2-955b-3aa7138d1d37.png\"><\/figure>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Powers On\u2026 Biden accepts blockchain <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">technology<\/a>, recognizes its benefits and pushes for adoption<\/em><\/strong><\/p>\n<p>In early April, the United Kingdom announced its intentions to regulate as-of-yet-unspecified stablecoins. The same month, a leading member of the U.S. Senate Banking Committee, Senator Patrick Toomey, introduced the \u201cStablecoin Transparency of Reserves and Uniform Safe Transactions Act of 2022,\u201d dubbed the Stablecoin TRUST Act for short, addressing cryptocurrencies whose prices are pegged to the U.S. dollar or other assets.<\/p>\n<p>Ironically, in an interview with the Financial Times published on May 6, as Terra began its descent toward zero value, Senator Toomey <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.ft.com\/content\/e88d46c8-a897-4cfc-8a68-e5370e6242d0\">called<\/a> on regulators to do more to regulate stablecoins \u201cbefore some bad thing happens.\u201d However, even he seems not to have predicted how quickly things were going to unfold: <\/p>\n<blockquote><p>\u201cHe pushed back against some of the stricter measures being promoted by Democrats, who believe stablecoins are now worth so much money that their operators should be regulated like banks.\u201d<\/p><\/blockquote>\n<p>Since then, things have started to move more quickly. Once the Terra route began, from about May 5, regulators quickly stepped up their level of vigilance. In a report issued on May 9, the U.S. Federal Reserve said stablecoins were \u201cvulnerable to runs\u201d and lacked transparency about their assets. And Treasury Secretary Janet Yellen recently commented on the urgent need for guardrails, saying it would be \u201chighly appropriate\u201d for lawmakers to enact legislation as soon as this year.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>The United States turns its attention to stablecoin regulation<\/em><\/strong><\/p>\n<p>Elsewhere, in June, Japan became one of the first countries \u2014 and by far the largest economy \u2014 to regulate a form of non-fiat digital money when its parliament approved the regulation of yen-linked stablecoins. This was not Terra-collapse related but based on a regime first proposed by Japan\u2019s Financial Services Agency in March 2021. The new law guarantees face-value redemption, restricts stablecoin creation to regulated institutions, and requires stricter Anti-Money Laundering measures.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"%E2%80%A6and_are_missing_the_point\"><\/span>\u2026and are missing the point<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Despite these warnings and emerging policy steps, what seems to be missing is a clear distinction between algorithmic and asset-backed stablecoins. In my view, asset-backed fiat stablecoins should be regulated by governments and have capital adequacy rules and restrictions on what can be done with reserves.<\/p>\n<p>Algo stablecoins, if they survive as a class, should come with extensive health warnings about the risks that remain on consumers\u2019 shoulders. Algos are the latest in a long line of innovations \u2014 the next won\u2019t be long in coming, and regulators won\u2019t be ready for it either. The reality is that people need to take care of their own assets and wealth. Any fully decentralized environment always requires that people protect their own assets closely and with vigilance.<\/p>\n<p>And compounding the sense that reality is outs<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/trip-and-travel\/\" data-internallinksmanager029f6b8e52c=\"10\" title=\"Trip &amp; Travel\" target=\"_blank\" rel=\"noopener\">trip<\/a>ping regulators\u2019 ability to keep up, the existence of fully backed coins, such as USDC, seems to remove any need for the U.S. government to develop its own central bank digital currency, or what some call the \u201cdigital dollar.\u201d<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>US central bank digital currency commenters divided on benefits, unified in confusion<\/em><\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Darkest_before_the_dawn\"><\/span>Darkest before the dawn<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>At the time of writing, we are only a few weeks past the Terra collapse. As a result, stablecoins are under a cloud, and the long-term impact on the broader ecosystem of blockchain tokens, which remain under pressure since prices peaked in September 2021, is still unclear.<\/p>\n<p>Many commentators are reveling in the crypto gloom, stoking the latent skepticism many people feel about the entire crypto project unleashed by Satoshi Nakamoto.<\/p>\n<p>In my opinion, as far as stablecoins are concerned, it\u2019s a case of being \u201cdarkest before the dawn.\u201d Most people did not \u2014 and still do not \u2014 understand that all stablecoins were not born equal. Algorithmic stablecoins, as is now obvious, were a disaster waiting to happen. Fully backed stablecoins \u2014 ideally within the regulatory environment being planned or adopted in the U.S., U.K. and Japan, among others \u2014 are a perfectly sensible option with important roles to play in the hybrid crypto-fiat economies of the future. Their time has come.<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/p>\n<p class=\"post-content__disclaimer\"><em>This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.<\/em><\/p>\n<p class=\"post-content__disclaimer\"><em>The views, thoughts and opinions expressed here are the author\u2019s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.<\/em><\/p>\n<div>\n<div style=\"background: rgb(239, 239, 239); border: 1px solid rgb(204, 204, 204); padding: 10px;\"><strong>Uldis T\u0113raudkalns<\/strong> is the CEO of NexPay, a Lithuanian fintech startup providing banking infrastructure for the digital assets industry. Uldis has more than a decade of experience working in finance and managing venture investments, and has served on the boards of different companies. Uldis holds a master\u2019s degree in finance from the Stockholm School of Economics and is a co-host of <em>The Pursuit of Scrappiness<\/em>, a leading business and startup podcast in the Baltics.<\/div>\n<\/div>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/after-terra-s-fall-to-earth-get-ready-for-the-stablecoin-era\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; After Terra\u2019s fall to Earth, get ready for the stablecoin era &#8220; Stablecoins were supposed to be the boring uncle of the crypto world \u2014 safe, sensible and dull. They\u2019re probably not what Satoshi Nakamoto had in mind, but they\u2019re supposed to be a reassuring haven of calm and utility away from the turbulence&#8230;<\/p>\n","protected":false},"author":1,"featured_media":472460,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDcvYmIyMTY5Y2QtZGU1Mi00M2IyLWI2NzctMmE0N2I1ZGI3MjNiLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[75046,75022,74863,74868,75493,74355,70550,71511,20618,70934,67874],"class_list":["post-472459","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-cbdc","tag-central-bank","tag-cryptocurrencies","tag-defi","tag-stablecoin","tag-adoption","tag-federal-reserve","tag-government","tag-japan","tag-regulation","tag-united-states"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/472459","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=472459"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/472459\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/472460"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=472459"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=472459"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=472459"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}