UST losing its peg should draw regulatory attention to algorithmic stablecoins and their role in the crypto ecosystem, nikhileshde writes in this week's State of Crypto newsletter.
Over the weekend, algorithmic stablecoin TerraUSD broke its peg. It broke it again on Monday, and has yet to recover. Regulators may have to take a closer look at this particular model of stablecoin.
For new readers of this newsletter, or for those who don’t normally follow stablecoins that in-depth, the idea is you have a cryptocurrency whose value is stable relative to another asset, such as the dollar, which you can then use as an intermediate unit of exchange or to buy goods and services using crypto without having to worry about market volatility.
Algorithmic stablecoins are different. Rather than being backed 1:1 by dollars, the idea is you have two tokens, the stablecoin itself and a sister token that is issued or burned as needed to maintain the stablecoin’s price. during a Senate Banking Committee hearing as a representative of the Financial Stability Oversight Council .
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