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Tether CTO says Terra stablecoin was a recipe for disaster

 


Tether's CTO says Terra's idea of ​​creating a stablecoin was a recipe for disaster.


Tether (USDT) Chief Technology Offer (CTO) Paolo Ardoino has cited the Terra ecosystem as the main catalyst for the crash.


He was a guest on Kitco News , where he accused the Terra founders who created the UST stablecoin of being a recipe for disaster.


DA LUNA, the token that acted as the top collateral for UST, according to Ardoino, it was inevitable that the stablecoin would lose its dollar peg the moment the token crashed.


“To have a safe reserve, one cannot have cryptocurrencies, especially 100% cryptocurrencies. These guys created two things, their own cryptocurrency called LUNA and a stablecoin on top of that cryptocurrency. It's a recipe for disaster."


Furthermore, he noted that to avoid Terra's fate, stablecoins must have sufficient reserves, as is the case with Tether. In order to maintain the USD peg, Ardoino stated that there should be a portfolio of assets including US Treasuries, bank deposits and commercial paper.


After the collapse, Terra also made headlines after the bond temporarily fell. Ardoino explained that traders are trying to short the stablecoin at the moment. However, due to the collateral portfolio, Tether was able to hold its bond.


Tether has also said that the slight decline in the USD peg was due to a lack of liquidity on some crypto exchanges.


After the Terra ecosystem crash, Terraform Labs came under closer scrutiny for its role in the incident, which resulted in significant crypto losses.


As a result, company founder do Kwon was faced with allegations of fraud. The company reportedly laundered $4.8 million through a South Korean shell company through a scheme involving a Seoul-based blockchain consulting firm, K.”


Since then, South Korean authorities have been investigating early Terra developers, with reports suggesting that some officials were initially opposed to the launch of UST stablecoin due to potential "volatility."

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