Backing Stablecoins With Bitcoin or Altcoins Eliminates This Huge Danger, Says Terra (LUNA) Founder Do Kwon

by Cryptospacey

Terra (LUNA) founder Do Kwon says that backing stablecoins with the US greenback could restrict the use circumstances of those property.

In a brand new interview on CNBC, Kwon identifies the potential dangers that include pegging stablecoins, that are crypto property backed by a reserve asset resembling fiat or one other cryptocurrency to supply value stability towards the greenback.

“I don’t assume that there’s something incorrect, per se, with backing stablecoins when it comes to {dollars}. It’s simply that there are some limits to the issues that you are able to do with the use circumstances of the so-called centralized stablecoins.

The difficulty is that for those who’re retaining a greenback within the checking account for each unit of stablecoin that’s issued, that stablecoin now has an issuer and an operator. What which means is that you’ve got all of the attendant compliance and custodian dangers of getting an operator and an issuer as a result of, as an example, what occurs if the corporate for some purpose goes bankrupt? In that case, all people that constructed fascinating issues on high of that stablecoin is now held hostage to the chapter courtroom…

Or on condition that financial institution deposits are really easy to control, I believe one of many issues that we’ll begin to see with centralized stablecoins is that there’s going to be huge compliance creep, which signifies that over time, you’re going to begin to layer on issues like KYC [know your customer] necessities and form of vetting what sorts of functions can use a stablecoin, which isn’t essentially applicable for all use circumstances.”

Kwon says that Bitcoin (BTC) and altcoins resembling LUNA could remove the dangers tied with centralized stablecoins, or these backed by conventional forex.

“A decentralized stablecoin, as one thing that’s backed in native cryptocurrency like LUNA or Bitcoin, has the property that there is no such thing as a issuer, there is no such thing as a operator as a result of anyone on the earth can commerce in a greenback’s price of Bitcoin, can commerce in a greenback’s price of LUNA to concern one TerraUSD. This has the great property that it makes decentralized finance actually decentralized.”

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