FTX Founder Says It’s Time to Redefine the Term Stablecoins -Breaking
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© Reuters. FTX Founder Says It’s Time to Redefine the Term Stablecoins- Samuel Bankman Fried (SBF) discusses how different stablecoins can mean different things.
- In a Twitter thread (NYSE:), the entrepreneur offered three explanations.
- This description, he believes, is essential for policy-makers.
Samuel Bankman Fried (founder of FTX), also known under his initials SBF tweeted today about what stablecoins might mean. In the Twitter conversation, he described three distinct definitions of stablecoins along with some examples.
“One thing it can mean is: stablecoin backed 1:1 by USD in a US bank account,” said the young crypto billionaire. “That’s what current drafts of US regulations are looking to license, as a first step.”
2) One thing it can mean is “stablecoin backed 1:1 by USD in a US bank account”.That’s what current drafts of US regulations are looking to license, as a first step.
— SBF (@SBF_FTX) May 12, 2022
The entrepreneur continued to add, “Another is stablecoin backed >= 1:1 by liquid debt assets, treasuries, and USD.” He explained that this meant non-zero price risk, but that they generally stayed very close to $1 because they could be redeemed. SBF then used the USDTs example to explain how USDTs remained within a small percentage of $1 in this current crash.
The third definition offered by the young entrepreneur was: stablecoin backed >= 1:1 by a very volatile asset. These stablecoins are, according to him, algorithmic. SBF uses UST to illustrate this category.
Really we shouldn’t use the same word for all of these things. What we call ‘algorithmic stablecoins’ aren’t really stable in the same way that fiat backed stablecoins are. They’re more like structured products, and they need upside if they want to justify the risk.
SBF thinks that although people working in crypto know these distinctions, it might not apply to policy-makers. He said that this was essential to communicate.
The responses to SBF’s thread were mixed. Some users agreed with him saying, “I was thinking yesterday exactly the same thing” and “So very true.” Others’ remarks weren’t this supportive with some even calling the post nonsensical.
FTX was established by SBF in 2003 as a derivatives exchange aimed to serious traders. The company is valued at $32 billion today. SBF has a reputation for being a trusted figure in crypto and is someone policymakers will be more inclined to work with.
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