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The Cardano founder believes that algorithmic stablecoins are better suited to the activities of the crypto industry, unlike asset-backed ones. He believes the crypto industry is steadily becoming centralized following the approval of spot Bitcoin ETF in the United States last month.
Adopting Algorithmic Stablecoins
While speaking recently at a popular podcast show, Charles Hoskinson, the Cardano founder, opined that algorithmic stablecoins should be used in the cryptocurrency industry. Hoskinson also explained why some partners have stopped working on the Cardano project.
He said their reluctance was because Cardano is firmly committed to its ethics and has grown successfully without any venture capital (VC) funds, which makes it different from other firms in the crypto industry. According to Hoskinson, some projects and actors in the crypto world are scared off by Cardano’s success.
Hoskinson explained that he supported asset-backed stablecoins when asked about the absence of USDC on the Cardano network. However, he pointed out that centralized entities control many asset-backed stablecoins. As a result, such stablecoins cannot be classified as cryptocurrency.
Centralization In The Crypto Space
Furthermore, the Cardano founder expressed apprehensions regarding the growing control centralized exchanges have over a significant proportion of asset-backed stablecoins. Hoskinson described the recent authorization of spot Bitcoin ETFs in the United States as a reinforcement of the consolidation of power within the cryptocurrency sector.
He asserts that the firms issuing the approved ETFs have successfully established their dominance over the entirety of the cryptocurrency industry. Furthermore, Hoskinson expressed concern over the lack of progression in the cryptocurrency industry, contending that recent advancements deviate from the initial objectives set by early pioneers of cryptocurrencies.
Although Hoskinson recognized Cardano’s decision to abstain from exploring asset-backed stablecoins, he stated that his team has diligently researched algorithmic stablecoins. His team believes this stablecoin type is more compatible with the ever-changing dynamics of the crypto sector.
Are Stablecoins Unstable?
In a related development, Dean Orr, the governor of the Reserve Bank of New Zealand, made a thought-provoking statement during a recent parliamentary hearing describing stablecoins as an “oxymoron.” Orr underscored the intrinsic unreliability of stablecoins, arguing that their effectiveness depends on the fiscal well-being of the facilitating entity.
Recently, there has been a heightened concern regarding stablecoins. Many observers scrutinize some stablecoins for their established benchmarks, owing to uncertainties regarding the financial stability of the institutions that hold these assets in trust.
An example is TrueUSD (TUSD), which trades below $1 after losing its USD peg. Reports indicate that the loss of the USD peg was due to concerns regarding the stablecoin’s inability to exchange issued tokens for fiat currency.
Ensuring Stablecoins’ Stability
Orr further explained that the New Zealand dollar, along with other fiat currencies, derives its value from parliamentary approval and is safeguarded by an autonomous central bank to maintain consistent and low inflation levels. Nevertheless, there is a growing consensus within the Federal Reserve and academic circles on the need to establish frameworks ensuring the stability of stablecoins as a medium of financial settlement.
While speaking during a recent TV interview, Cantor Fitzgerald’s CEO, Howard Lutnick, who manages a substantial portion of Tether’s assets, reassured the crypto community that the stablecoin issuer possesses the claimed financial resources. Lutnick added that he manages a significant part of their assets, and their thorough assessment indicates that Tether indeed possesses the funds they claim to own.
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