“Non-asset-backed stablecoins are pyramid schemes” Kristalina Georgieva
Kristalina Georgieva, managing director of the International Monetary Fund, said real-world non-asset-backed stablecoins are “pyramids” and “pyramids are doomed to fall.”
Speaking at the World Economic Forum, Georgieva expressed her views on cryptocurrencies and talked about raising public awareness about them.
Georgieva said: “It is our responsibility to explain to people what is Central Bank digital currency, what is stablecoin, what is the difference between real stablecoins and ‘unstable’ stablecoins. “
Emphasizing stablecoins, one of which was the main trigger for the recent crypto crash, Georgieva expressed her views on algorithmic stablecoins, calling them “pyramids that will fall.”
She said, “If a stablecoin is individually backed by assets, it is a ‘stable’ stablecoin. When it is not asset-backed, but promises to deliver 20% returns, it is a pyramid. And what happens to the pyramids, they eventually fall.
It should be noted that stablecoins are cryptocurrencies tied to external variables. They can either be pegged to commodities or fiat currencies, etc.
Some stablecoins hold real reserves of the external variable to which they are pegged. While other stablecoins have no such reserves and are algorithmically managed down to their ankles. TerraUSD was an algorithm-controlled stablecoin.
Talking about what should be the next priorities for regulators when it comes to cryptocurrencies, the IMF chief said: “Regulating stablecoins, ensuring interoperability of CBDCs, and recognizing that Bitcoin can be called a “coin but that’s not a coin.” It’s not real money, it’s what we have to work for.
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