The Tether cannot lose its attachment to the dollar because it can always get redeemed for one US dollar, said Reeve Collins.
One of the consequences of the recent crash of Terra (LUNA) and its algorithmic stablecoin UST has been the strengthening of scrutiny routines applied to stable coins.
Tether (USDT), the most prominent stablecoin in the market, also fell victim to these accusations and criticisms, especially after the asset momentarily lost its attachment to the US dollar amid Terra’s fall.
Despite these harmful situations, some USDT enthusiasts went to unveil their confidence in the project, assuring they would always support the cause. In an interview held by CNBC, Tether co-founder Reeve Collins confirmed that the stablecoin receives full support from its dollar reserves. Investors need not raise concerns about a probable decoupling.
Co-Founder Defends USDT Attachment
Collins, the CEO of BLOCKv and a businessman that currently does not carry out activities linked to the stable coin’s issuing entity, received some questions at the meeting about the slight drop in price that USDT detected a few weeks ago. A situation appeared when the cryptocurrency market, in general, got seriously harmed by the collapse of Terra.
The co-founder denied any drop affecting thether, saying that price applied only to “third-party exchanges” because those markets focus their efforts on supply and demand. Collins then explained that Tether can always get redeemed for $1.
While acknowledging that a big issue could arrive if all the tokens in circulation get redeemed simultaneously, given that the stablecoin receives support from various financial instruments that could need a considerable time to settle, the co-founder gave a lot of trust to the project. It is backing 1:1 in US dollars.
Collins also spoke about the sudden fall of UST, labeling algorithmic stable coins as tests that may fail. He said this case is a total tragedy for those who employed the Terra stablecoin.
Tether Show its Concerns
The co-founder’s thoughts parallel a Tether post revealed on Monday. The issuing entity addressed recent investor criticism and concerns after the crash of Terra USD. In the statement, the team explained that the principal stablecoin cannot lose its parity due to its reserves and that it is always possible to get the coin redeemed.
The company also stepped away from UST, explaining that this algorithmic stablecoin does not count on any guarantee from dollar reserves as USDT is. A few days ago, Tether highlighted these general fears when it presented in its last quarterly report a lowering of 17% for its reserves in the commercial paper, a pretty controversial issue.
European Central Bank Raise Red Flags about Stablecoins
The event has put stable coins and the digital asset environment under the magnifying glass of regulators worldwide. The European Central Bank (ECB) launched a report this week that points to the recent crash of Terra’s UST and generally casts doubt on whether stable coins could offer 100% parity.
10% of eurozone households counts on digital assets, reveals European Central Bank report
The report, titled “Deciphering Financial Stability Risks in Crypto Asset Markets,” determines that the fall in this asset highlights the need to discuss how risks and developments affect this economic space.
By: Jenson Nuñez
