Algorithmic stablecoins like TerraUSD are all pyramids according to the IMF


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Investing.com – With the case of the collapse of the and its sister crypto, the topic of stablecoins has been front and center in recent weeks, and this topic was broached yesterday by IMF Managing Director Kristalina Georgieva , during a panel moderated by CNBC at the World Economic Forum on Monday.

She thus stated that stablecoins that are not backed by reserves are a pyramid scheme, referring here directly to TerraUSD, which was a stablecoin whose peg to the Dollar was based on algorithms, not reserves.

“When we look at stablecoins, this is where the big mess has happened. If a stablecoin is asset-backed, one-to-one, it’s stable. When it’s not asset-backed, but being promised a 20% return is a pyramid,” said Kristalina Georgieva, concluding:

“What happens to the pyramids? (…) They end up falling apart”.

Recall that the UST was created by Terraform Labs, which also manages Anchor, a loan and savings platform. Anchor offered investors a 20% annual return on UST if they deposited it with the platform.

Note that the IMF chief’s comments come after European Central Bank President Christine Lagarde said cryptocurrencies are “worthless” in an interview last weekend.

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