If you ask Binance CEO Changpeng “CZ” Zhao, Terra (LUNA) founder Do Kwon is probably right about algorithmic stablecoins. We all know what ended up happening to Terra’s stablecoin, terrausd (UST), which had a spectacular implosion in May 2022. According to CZ, however, the biggest risk to fiat-backed stablecoins is banks.
Banks pose a risk to fiat-backed stablecoins.
— CZ 🔶 Binance (@cz_binance) March 12, 2023
CZ on top of Terra and USDC
Chanpeng Zhao addressed issues surrounding Circle’s USD Coin (USDC) in his statement. Circle is eager to raise about $40 billion in funding from struggling Silicon Valley Bank (SVB), it was announced this week. It was largely successful, but with $3.3 billion still tied up with Bank of America, it may well herald the end of USDC.
Daoquan actually had the right idea, but failed miserably in execution.
— CZ 🔶 Binance (@cz_binance) March 12, 2023
In response to the Binance CEO’s tweet, one user called for a cryptocurrency-backed stablecoin. To this, Zhao Changpeng responded that Daoquan’s idea was correct, but it failed miserably in its execution.
Not everyone agrees with this statement. For example, Ryan Lion stated that, in his view, the whole idea of Terra’s stablecoin is wrong and has little to do with execution. “Building a $60 billion ecosystem doesn’t look like a failure to me. The flaw is that it’s not sustainable, and it contains weaknesses that should have been ironed out in the early stages,” RyanLion said.
The Dilemma of Cryptocurrencies and Banks
The whole situation surrounding America’s troubled banking sector mostly points to Bitcoin (BTC) potentially being a very important asset. If you can never be sure at the bank that you can always withdraw your credit, then this question does not apply to Bitcoin. This is what Satoshi Nakamoto invented Bitcoin for.
In this sense, you can think of Bitcoin as a stablecoin. Perhaps not based on extremely volatile daily prices, but on the asset itself. Events like this prove that a stable asset that you can rely on forever is far more important than a currency that artificially holds a certain value.
Throughout the history of crypto, the security of so-called stablecoins has never been fully established. Anyone who parks most of their wealth in stablecoins will be a little terrified of the scenario now threatening to unfold with USDC.
Source of information: Compiled from CRYPTO-INSIDERS by 0x Information.Copyright belongs to the author Thom Derks, without permission, may not be reproduced