“It was obvious to me, it wasn’t to many that it was a bad idea,” stated Tether and Bitfinex CTO Paolo Ardoino.
Tether and Bitfinex CTO Paolo Ardoino stated that Terra (LUNA), was not meant to be a rug pull but was “poorly designed.”
Ardoino compared the market-shattering Terra ecosystem crash to a “castle” of cards that was due to collapse at any moment.
Many crypto-communities have raised concerns about the dubious actions and comments of Terraform Labs founder Do Kwon. Kwon was also reportedly involved in a previously failed Algo-Stablecoin project called “Basis Cash.”
Ardoino spoke out during an appearance on Reimagine Unplugged this week. This podcast is produced by Reimagine a media company that focuses primarily on Web3 content. Kwon’s misguided self-belief was a major problem, according to the CTO.
“I don’t know Do Kwon. Let’s not forget to give him the benefit. He was arrogant and believed he was right. Many were supportive of him. However, the project was not a rug pull right. It was a poorly designed project as most projects are.
He said, “That it was like a castle made of cards, and it could collapse, but he couldn’t say it because it would have fallen much faster. And again, it became clear to me, and to many, that I know it was a bad idea,”
CTO stated that the UST was too large to keep its peg. The UST’s collateralization, which was primarily in Bitcoin at the same time it tried to build its reserves, was not sufficient to support the stablecoin, but was still big enough to crash the markets further.
He said that they were in a cascade situation, where they had to defend their peg and they must sell collateral. These additional crashes were driving them to sell more collateral and so forth.
Ardoino was asked to explain the regulatory landscape for stablecoins. He suggested that policymakers should first clearly distinguish between stablecoins fully backed with assets and those primarily backed purely by algorithms.
“I believe the first thing that must happen is proper categorization. Terra UST is an algorithmic stablecoin and Tether is a centralized stabilizecoin. Two different beasts, with two different guarantees and backings.
Cointelegraph reported that Tether saw a 17% drop in its commercial paper holdings backing USDT’s stablecoin reserves in Q1. Tether also stated that its stablecoin had $82 billion in reserves as part of the legally required reporting due to the $18.5 million settlement with the Office of the New York attorney general. This was effective from January 2021.
