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Managing Director of the International Monetary Fund Kristalina Georgieva said that stable cryptocurrencies that are not backed by real assets are extremely similar to pyramid schemes.
According to CNBC, Kristalina Georgieva made her statement during a panel discussion at the World Economic Forum (WEF). Her words were sparked by the recent collapse of the UST stablecoin and the entire Terra ecosystem.
“Stablecoins are an area that can bring a lot of problems. If the stablecoin is backed by assets in a ratio of 1: 1, then it can be called stable. And if the token is not backed by an asset, but promises an annual income of 20%, then this is a pyramid. And what happens to the pyramids? Over time, they collapse,” she stressed.
Recall that the algorithmic stablecoin UST was released by Terraform Labs in 2018. Anchor’s Terra platform offered an annual return of 20% on deposits in UST.
In this regard, experts in the cryptocurrency industry have repeatedly talked about the signs of a pyramid scheme. As a result of the decline in the cryptocurrency market, the UST algorithm failed to maintain a peg to the US dollar, which led to the cascading collapse of the Terra ecosystem.
Earlier, Kristalina Georgieva called for the creation of a new public infrastructure of payment systems, including digital currencies.
#Stablecoins #collateral #hallmarks #pyramids