There is needed for categorization of stablecoins, where, to be clear, there are generally three varieties of stablecoin:
1. Centralized fiat collateralized (USDT, USDC),
2. Crypto collateralized (DAI, sUSD) and
3. Algorithmic stablecoins (UST, IRON, USDD).
Amongst the asset-backed stablecoins, Tether USDT is the biggest, followed by USDC. However, the algorithmic stablecoins, those are the ones that are blowing up, it’s ‘stable-in-name-only’.
The risk that has manifested itself is exactly why the policy conversation about these types of issues matters.
‘Algorithmic Stablecoins’ should be appropriately named ‘Algorithmic UNSTABLECOINS’.
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