Skip to content

Tether CTO says Terra creating a token and stablecoin was a ‘recipe for a disaster’

Tether CTO says Terra creating a token and stablecoin was a 'recipe for a disaster’

Paolo Ardoino, the chief technology officer (CTO) of Tether (USDT), has termed the Terra (LUNA) ecosystem set up as the main catalyst behind the coins crash.

Speaking during an interview with Kitco News on June 7, Ardoino faulted the Terra founders for creating the UST stablecoin and backing it with a cryptocurrency as ‘a recipe for disaster.’ 

According to Ardoino, with LUNA acting as the highest collateral for the UST, it was inevitable for the stablecoin to lose its dollar peg once the token crashed. 

“To have a safe reserve, you cannot have cryptocurrencies, especially 100% cryptocurrencies. These guys were creating two things, one their own cryptocurrency called LUNA, and a stablecoin on top of that cryptocurrency. That is a recipe for disaster,” he said. 

Stablecoins and portfolio of collateral 

Furthermore, the official noted that for stablecoins to avoid the fate of Terra, they need to have sufficient reserves, like in the case of Tether (USDT). To maintain the peg with the dollar, Ardoino stated that there should be a portfolio of assets, including U.S. treasuries, cash bank deposits and commercial papers. 

After the collapse of Terra, Tether also made headlines after its peg temporarily dropped, with Ardoino stating that at the moment, traders attempted to short the stablecoin. However, due to the collateral portfolio, the stablecoin could not lose its peg.

Tether has since maintained that the minor drop in the U.S. dollar peg was due to a lack of liquidity on some crypto exchanges

Following the crash of the Terra ecosystem, Terraform Labs, the company behind the cryptocurrency, has come under scrutiny over its role in the incident that resulted in significant crypto losses. 

Consequently, the firm’s founder, Do Kwon, is now facing allegations of fraud. The company reportedly laundered $4.8 million through a South Korean shell company through a scheme involving a “blockchain consulting firm K” based in Seoul. 

South Korean authorities are now investigating some of the early Terra developers, with reports indicating some employees were initially against the launch of UST stablecoin over possible “fluctuations in value.”

Watch the full interview below:

Best Crypto Exchange for Intermediate Traders and Investors

  • Invest in 70+ cryptocurrencies and 3,000+ other assets including stocks and precious metals.

  • 0% commission on stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.

  • Copy top-performing traders in real time, automatically.

  • eToro USA is registered with FINRA for securities trading.

30+ million Users
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. eToro USA LLC does not offer CFDs, only real Crypto assets available. Don’t invest unless you’re prepared to lose all the money you invest.

Read Next:

Weekly Finance Digest

By subscribing you agree with Finbold T&C’s & Privacy Policy

Related posts

Disclaimer: The information on this website is for general informational and educational purposes only and does not constitute financial, legal, tax, or investment advice. This site does not make any financial promotions, and all content is strictly informational. By using this site, you agree to our full disclaimer and terms of use. For more information, please read our complete Global Disclaimer.