The approvals come after the Singapore Monetary Authority released two consultation papers proposing to lower regulatory barriers for [digital asset](/news/article/freeway-crypto-halts) service providers.

## How Circle and Paxos crypto firms received approval 

[Circle](https://www.circle.com/en/pressroom/circle-earns-in-principle-regulatory-approval-in-singapore) obtained in-principal permission for a Major Payments Institution License, which will let it issue cryptocurrency and deal with domestic and cross-border payments. At the same time, Paxos gained authorisation to provide digital payment token services. 

Circle and [Paxos](https://paxos.com/2022/11/02/paxos-secures-major-payments-institution-license-from-monetary-authority-of-singapore/) announced their approvals on November 2, only a week after the Monetary Authority of Singapore [(MAS) released two consultation papers]https://www.mas.gov.sg/news/media-releases/2022/mas-proposes-measures-to-reduce-risks-to-consumers-from-cryptocurrency-trading-and-enhance-standards-of-stablecoin-related-activities#:~:text=Singapore,%2026%20October%202022%E2%80%A6,in%20the%20digital%20asset%20ecosystem.() outlining suggestions for regulating digital payment token service providers and stablecoin issuers under Singapore's Payment Services Act (PSA). 

The Singapore Parliament enacted the PSA in 2019, which seeks to regulate payment systems and empowers the MAS to monitor the behaviour of payment service providers.

## What will Circle and Paxos crypto firms be able to do with approval

Circle, the creator of USD Coin ([UDSC](https://www.coingecko.com/en/coins/usd-coin)), and Paxos, the creator of Pax Dollar (USDP), both US dollar-pegged stablecoins, will now have the approval to sell their stablecoins and digital payment token products in Singapore. 

Circle's Global Head of Public and Chief Strategy Officer, Dante Disparte, believes that the licence would increase the potential for cryptocurrencies and open payment systems to stimulate economic growth in Singapore under the more creative legal environment.

## Paxos crypto firms Asia CEO's view

We're happy to have MAS as our regulator. With their oversight, we'll be able to safely drive consumer adoption of digital assets internationally in conjunction with the world's largest corporations, said the Paxos Asia CEO, Rich Teo. 

While we remain to see how many other enterprises will follow in the footsteps of Circle and Paxos, the [regulatory](/news/article/pgi-global-closed) relaxation comes after MAS rejected over 100 out of 170 applicants in late 2021 under the stricter system.

Singapore is working hard to claim back its reputation as one of the most crypto-friendly countries. However, it remains cautious for individual investors, with Singapore's largest bank, [DBS, recently opting to limit its crypto trading services to approved investors who fulfil strict requirements.](https://www.bloomberg.com/news/articles/2022-09-23/singapore-s-dbs-expands-crypto-trading-for-wealthier-clients#:~:text=DBS%20Group%20Holdings%20Ltd.,%20Singapore's,said%20in%20a%20statement%20Friday.)


Circle and Paxos crypto approval in Singapore

After seeing an impressive rise following the collapse of [Terra](/news/article/terra-luna-classic) in May, Circle's dollar-pegged USDC coin has experienced a massive downfall.

The market capitalisation of Circle's [USDC coin has plummeted sharply](https://cryptopotato.com/usdc-lost-20-of-its-market-capitalization-in-the-last-30-days/) since the Tornado Cash scandal.

The stablecoin appears to have lost market share to rivals such as [Binance](/news/article/binance-hack) USD (BUSD), the world's third-largest stablecoin, and Tether. Since early July, the BUSD market value has increased by 21% to $21.66 billion. Tether has risen by 3% to $68.3 billion.

USDC dropped nearly 20% of its market capitalisation last month, falling from $53.3 billion to just below $43.9 billion. Almost $5 billion of stablecoin was withdrawn in a single day (26 September), depicting a loss of roughly 9.2% of its total capitalisation.

## The effects of freezing cash-linked Tornado addresses

Although the coin started to lose popularity in July, the action to freeze more than 75,000 circle coins of funds associated with 44 [Tornado Cash](/news/article/tornado-cash) addresses was a turning point that led to backlash and a wave of withdrawals.

Even MakerDAO, which had a significant portion of its reserves backed in USDC, viewed Circle's actions as a breach of privacy rights. The project began to discuss abandoning its reliance on the coin, arguing that given the extreme level of centralisation the coin has by nature, it could face the same consequences as the wallets connected to Tornado Cash at any time.

Even though it appeared MakerDAO was turning against the coin, they announced yesterday that a new plan to deposit USDC on Coinbase's institutional custody platform had been approved. They will escrow up to $1.6 billion in USDC reserves on Coinbase Prime to earn 1.5% in rewards. 

Therefore, even the coin capitalisation keeps declining, significant projects still place bets on its potential for future recovery.

## Bottom line

Although the current outlook for [USDC](/news/article/circle-usdc) is not promising, the project will likely maintain its position among the top five cryptocurrencies. However, they must regain the trust of some major exchanges and projects in the crypto community, and the compliance card may entice more players to join their ranks.


USDC coin loses 20% of market capitalisation

One of the preferred stablecoin options in 2022 is [TrueUSD](https://www.trueusd.com/), or also known as TUSD.

What is the TUSD crypto stablecoin? TUSD is an ERC-20 stablecoin that is fully backed up by the US dollar. At this time, it is one of the most trusted and securely regulated stablecoins using USD. It was created by the firm TrustToken Platform in order to combat the rise of fraud in the crypto space. It is backed up by TrustToken’s real provable fiat assets.
 
Large amounts of fraud have caused massive concerns about crypto adoption, especially among governments. This means that big-name exchanges and other companies in the crypto industry want to lower the risk for their clients. This is why stablecoins were created. 

## What is a stablecoin? 

In simplest terms, a stablecoin is a cryptocurrency of which the price is designed to be based on a reference asset. In the case of TrueUSD (TUSD), the reference asset is the US dollar. Volatility is mitigated by maintaining proven collateral. In the case of some stablecoins, an algorithm is used to keep the value steady and adjust supply based on a set of rules. 

## What can I do with TUSD crypto?

In the simplest terms, a stablecoin like TrueUSD (TUSD) can be seen as the “crypto version” of a real dollar.
 
However, the ease of moving and verifying cryptocurrency is often the trade-off for volatile prices and a lack of security. This is where stablecoins come in by mitigating the risk to investors and institutions by holding collateral. Here is where TrueUSD (TUSD) really shines.
TUSD crypto is one of the most heavily regulated stablecoins out there

## If you’re still reading, you are probably wondering: Is TUSD safe? 
 
The simple fact is this: TrustToken, the creators of TUSD crypto, are monumentally proud about their adherence to regulation as well as the fact that TUSD is backed by real assets.
 
The TrustToken platform has partnered with accounting giant [Armanino](https://www.armaninollp.com/industries/crypto-digital-assets/) to create TrustExplorer. According to Armanino’s Noah Buxton, Armanino is the first accounting firm to “formalize and complete a Proof of Reserves for a digital asset exchange.” Simply put, this is a way for those who hold digital assets on an exchange to verify that said exchange really has those assets! 

You can delve further into TrustToken regulatory compliance for yourself and get to know more about their partnerships on the [TrustToken](https://www.trusttoken.com/) website. 
 
## What makes TUSD crypto stand out from other stablecoins?

TrustToken Platform gets revenue in the form of interests in holding USD in their accounts. TUSD does not charge a fee for holders or for trading. This means there are zero or near-zero transaction fees associated with using TUSD.

## Bottom Line about the TUSD crypto stablecoin

Is TrueUSD (TUSD) here to stay? Is TUSD safe? TrueUSD is one of the USD stablecoins you must watch as a crypto investor. It is available on the Ethereum blockchain, which means that it is part of a growing ecosystem that is widely adopted in the crypto space. Also, adherence to regulation is key, and the TrustToken platform takes compliance and attestation very seriously. 



What is TUSD stablecoin?

The crypto market has expanded exponentially in recent years with more than 9,000 digital coins. Now, investing in cryptocurrencies has become a mainstream trend. You can now generate passive income through lending and capital gain by crypto investing or trading. Another avenue you can take is investing in the many blockchains and DeFi startups.

There is also a rising trend of real-world equity investing and trading with stablecoins. Decentralised exchanges like [FTX US](https://www.ft.com/content/8379f141-8b94-438e-8347-cb5ffdf003ac) have already begun to offer services in this area. This has opened a new gateway for buying shares in a company with cryptocurrencies. 

However, the market lacks clarity on how equity trading will work with stablecoins. To make things more straightforward, we have discussed below how retail investors can benefit from fiat-based stablecoin investing. 

## The crypto world meets the stock market

The crypto market involves digital assets that emerged only in the last decade. The stock market is a much more mature and competitive market that involves real-world assets. Stocks were considered the primary investment option by the masses. But, as the crypto world continues to grow, many digital tokens have gained investors’ attention.  

However, crypto is a precarious and unpredictable market. That’s why tokens’ real-world usage is still limited. For this reason, stablecoins were introduced, pegged with fiat currencies. But the debacle of the Terra ecosystem left a dent in their reputation. 

Now, many DEXs are looking to link stocks and stablecoins. This will even help crypto investors in buying shares in a company. Moreover, it will help in diversifying your portfolio and help increase the real-world usage of crypto coins and tokens. 

## Crypto exchanges for buying shares in a company

Buying shares in a company with cryptocurrencies is an emerging trend in the industry. There are limited exchanges that offer equity trading services with stablecoins. Here are a few names that have already started or have announced to provide this service soon.

1.	FTX US
One  of the leading digital asset exchanges, FTX, has recently announced its services in the stock market. The exchange will allow buying company shares with both fiats and fiat-backed currencies. FTX US will primarily deal with US dollar-pegged stablecoins like Binance USD and USDC (USD Coin). Also, the exchange made it clear that it would not be supporting algorithmic stablecoins like [Terra](/news/article/terra-usd) USD.

2.	Voyager Digital
Another US decentralised exchange, Voyager Digital, has also signalled toward offering a similar service. It will work as a brokerage platform and allow you to buy stocks through stablecoins. Voyager Digital will likely work with USD-backed stable tokens like USDC. The platform has announced it would begin offering the service later this year, however this looks unlikely given that Voyager filed for bankruptcy protection last month.

3.	Bitstamp USA
Yet another US-based crypto exchange, Bitstamp USA, might enter the stock trading services via stablecoins. The platform has yet to announce its plan for when and how it will introduce the equity trading service. However, the platform’s CEO, Bobby Zagotta, showed keen resolve to enter the market.  

## Bottom line

Stablecoins in the stock market can revamp the existing business model of brokerage exchanges. It can create an environment where investors can trade both real-world and digital assets in one place. Buying shares in a company may also help bring crypto investors into a regularised market and increase the real-world usage of cryptocurrencies. 




Buying shares in a company with crypto

US and UK crypto regulation authorities collaborate to foster and regulate the cryptocurrency and NFT market. The joint forces of these countries will be working on different initiatives to regulate crypto. This recent development will focus on promoting stablecoins and bringing financial innovation. 

Recently, the US Department of the Treasury released a joint statement regarding the UK and US collaborative financial regulatory working group. The virtual meeting was held on 21 July. 

The HM Treasury and the [US Department of the Treasury](https://home.treasury.gov/news/press-releases/jy0888) members took part in the meeting. Besides, the Bank of England (BOE), the Board of Governors of the Federal Reserve System, the Financial Conduct Authority (FCA), the Commodity Futures Trading Commission (CFTC), the Office of Comptroller of the Currency (OCC), the Securities and Exchange Commission (SEC), and the Federal Deposit Insurance Corporation (FDIC) were also part of the meeting. 

## US and UK crypto regulation focus points

In general, the crypto regulators from the UK and US discussed seven themes. These include a cooperative international and bilateral approach, financial innovation, secure financing, and non-bank financial intermediation (NBFI). Moreover, benchmark transition, operational resilience, and developments in the Russia-Ukraine war. 

The Working group meeting established that it will focus on promoting financial stability to reduce the risk and uncertainty from the market. Regarding the issue of Non-Bank Financial Intermediation, the meeting decided that liquidity risk management must be prioritised. 
Besides that, the Working Group also discussed the situation of stablecoins in detail. The developments in central bank digital currencies (CBDCs) were also a key discussion point. For this, all participants showed commitment to promoting safe monetary innovations and regulatory measures for stablecoins that can be followed throughout the jurisdiction. 

The officials from both countries acknowledged the importance of the US and UK crypto regulation partnership. Also, the members from both sides pledged that they would work together to introduce long-term crypto-asset regulations for a robust and safe market. Earlier, UK lawmakers confirmed to broaden [property rules](/news/article/uk-assess-crypto-law) to the crypto space and NFT. Such developments will help the government in becoming a crypto hub in the future. 

US and UK crypto regulation officials join forces

Argentina's tax department has confiscated over 1,000 bitcoin wallets related to the country's delinquent taxpayers. Without KYC, 52 per cent of Argentinians are unbanked. Crypto exchanges verified the identification of clients without KYC and retained user account records and detailed financial information.

The decision comes as [Argentinians continue to embrace stablecoins](https://cointelegraph.com/news/usd-stablecoin-premiums-surge-in-argentina-following-economy-minister-s-resignation) to battle rising inflation, a depreciating peso, and general economic gloom. 

According to three leading crypto exchanges, people are trying to hedge against a future Argentine peso (ARS) depreciation, whose purchasing value has tumbled in the last year as inflation has skyrocketed. 

Argentine crypto exchange Buenbit's trading volume increased by 300 per cent on Sunday compared to the same day in prior weeks, with "many people" using their DAI as collateral to secure loans in Argentine pesos and purchase additional DAI.  

Following Guzman's departure, the peso fell almost 15% against the stablecoins DAI and tether on the platforms of many large crypto exchanges. Both stablecoins increased from ARS 245 to ARS 280 during the weekend.

Due to the 24/7 nature of crypto, the CEO of the Argentina-based crypto exchange Ripio noted that anytime there is one of these news stories in Argentina, it is the first market where Argentina begins to hunt for a price for the US dollar. Since many Argentinians are unbanked and without KYC, consequently raising the volume. 

Also, due to a significant lack of price references for the US dollar over the weekend, most Argentine crypto exchanges widened the disparity between the bid and ask rates to 18%, which is typically about 2%. 

According to the founder of the crypto education portal DefyEducation, crypto exchanges have established a large spread so that consumers do not trade and may hedge against tomorrow's opening price.

Prices rose, and spread's widened due to demand and the lack of a reference replacement price, according to the head of trading and strategy at Argentina-based crypto exchange Lemon Cash.

For the latest crypto coin news, visit [Moni Talks](https://monitalks.io/news/category/crypto-coin-news).




Argentina’s stablecoin demand soars as minister resigns

The European Union (EU) has introduced [Markets in Crypto-assets proposal (MiCA)](https://www.consilium.europa.eu/en/press/press-releases/2022/06/30/digital-finance-agreement-reached-on-european-crypto-assets-regulation-mica/), a framework for regulating the crypto market in the continent. On 01 July 2022, a MiCA reporter, Stefan Berger, took to Twitter to announce that Europe has become the first continent to have a regularised crypto policy. 

![MiCA.png](https://s3.eu-west-2.amazonaws.com/prod-monitalks-media/Mi_CA_136bb478bb.png)

Berger mentioned that the Parliament, Council, and Commission have approved a balanced MiCA framework. In addition, he indicated that PoW technology will not be banned; however, crypto issuers will be accountable for energy consumption and its impact on the environment. 

Where MiCA regulation has rejected the ban on PoW technology, it might still affect the digital asset market in various ways. One of the most affected crypto-assets can be stablecoins like EUROC and others. 

## MiCA’s harsh regulations for stablecoins like EUROC

The EU-endorsed MiCA framework has a dedicated section for stabilising stablecoins, including the [Euro coin](https://www.monitalks.io/news/article/euro-coin). The framework has considered the recent crash of Terra Luna, a stable cryptocurrency and formed policies to protect crypto consumers. 

For this reason, the framework proposed certain strict measures that the stablecoin issuers would have to take to mitigate instability and risk. Here are the proposed MiCA regulations for the stablecoins like EUROC:


1.	Stablecoin issuers must have an adequate liquid reserve with a 1:1 ratio.
2.	Stablecoin consumers can claim the token at any time without any additional fee.
3.	All stablecoins will be supervised by the European Banking Authority (EBA.)
4.	Non-European currency-based asset-referenced tokens will be regulated to ensure Europe’s ‘monetary sovereignty.’
5.	Asset-referenced token issuers would need to register themselves in the EU. 

## The stance of Circle’s Euro coin (EUROC) 

According to the Head of Global Policy and Chief Strategy Officer of Circle, Dante Disparte believes that:

>  “MiCA regulation will be to crypto what GDPR was to privacy.” 

Though many crypto users call MiCA a crack-down on the crypto market, Disparte reflected that MiCA policy will likewise work as a guiding framework for crypto issuers and consumers. 



MiCA regulations impact on EUROC and other stablecoins

## Stablecoin GBPT to be launched and rolled out across the best crypto exchange offerings in the UK 

The controversial cryptocurrency, Tether, is going to launch another stablecoin which will be made available on the best crypto exchange offerings in the UK. It will be pegged to the UK pound like [Tether (USDT)](/coins/usdt) is to the US Dollar. Previously there have been numerous coins pegged with different fiat currencies like US Dollar, Chinese renminbi, Mexican peso, euro, and others. 

![COinGecko GBPT stablecoin](https://s3.eu-west-2.amazonaws.com/prod-monitalks-media/Coin_Gecko_GBPT_3d49ca1662.jpg) 

(Coingecko, Twitter, 22.06.2022)

Pound-pegged stable coins will be available on the best crypto exchanges in the UK, including Binance. However, in the beginning, GBPT will be launched on the Ethereum blockchain in July. 

The launch of the UK pound pegged stable coin It further promotes stable cryptocurrencies. Moreover, it will help transform the UK market into a crypto hub. The chief technology officer of Tether, Paolo Ardoino, says that he believes “the UK to be the next frontier of blockchain.”

After the Terra Luna debacle, there has been a significant decline in using USD-pegged stable coins. Therefore, if executed correctly, it can be an attempt to revive stable digital currencies, restore trust and accelerate mass  adoption.

Moreover, Tether’s rival, Circle Internet Financial, which introduced the stable coin USDC (USD Coin), recently announced the introduction of a token pegged to the European currency. Circle’s coin is named Euro coin (EUROC), which is backed from Euro-dominated reserves. Closer to home, in the Isle of Man, where MoniTalks is head quartered, Blackfridge is developing a [poundtoken ](https://blackfridge.im/stablecoin/) too.

This token is also looking to counter the efforts of UK’s [Central Bank Digital Currency (CBDC)](https://www.bankofengland.co.uk/research/digital-currencies), which is a state-issued stable token. Moreover, the Bank of England is already discussing the introduction and regulation of stable coins in the market; this can be an opportunity for Tether’s UK pound-pegged coin to make a mark. 





Stablecoin GBPT launched on best crypto exchange UK

The [Terra Luna](https://coinmarketcap.com/currencies/terra-luna/) collapse wiped billions from the crypto market. Will it recuperate?

Visualise the moment when your entire investment is wiped out suddenly. That's the harsh reality for millions of investors in the Terra Luna cryptocurrency. Its value dropped dramatically from more than $100 per coin to less than $1, losing 99% of its value within a few minutes and sending huge repercussions around the whole crypto world.

So, what's the reason behind Terra's Luna cryptocurrency price collapse, and what impact will it have on the crypto market?

## What is Terra Luna?

Terra Labs, a South Korean blockchain development company, designed the project Terra network, which comprises two cryptocurrencies: TerraUSD (UST) and Luna (LUNA).

The Terra network authorises blockchain developers to make custom blockchains and DApps for a broad range of use cases, but typically operates on Delegated Proof of Stake (DPoS) algorithm. The network focuses on DeFi, NFT projects, and Web 3.0 apps. It's linked to other significant blockchains, including Ethereum, Binance Smart Chain, and Harmony, and is deemed a powerful player in the DeFi world.

Terra network possesses two native tokens, UST and LUNA, and both have different functions. UST is a stablecoin, implying its value is pegged to $1 and is utilised to risk or shift tokens when markets become jerky. In contrast, LUNA is a more tradable investment whose price fluctuates depending on market circumstances.

Both coins are intrinsically linked, with UST pegged to LUNA using something named "algorithmic pegging". Typically, a stablecoin is funded 1:1 with a tangible asset, like gold or dollars, ensuring investors that the value will stay at $1 (or reasonably close).

Algorithmic pegging operates a smart contract to alter the value of the linked assets automatically. In this case, the smart contract automatically uses LUNA tokens to mint new UST tokens, maintaining the UST price stable and LUNA deflationary (theoretically). So, no matter the market conditions, 1 UST can consistently be redeemed for or coined for exactly 1 LUNA.

## Reason Behind Terra Luna Collapse

The sudden Terra Luna collapse took place in early May 2022, when the value of UST unexpectedly began falling from its $1 peg.

The unexpected price fall caused a massive number of LUNA to be minted to stable the UST value, saturating the market with LUNA tokens. This pushed the price down and smashed LUNA's price overnight. Indeed, LUNA moved from a top 10 crypto to descending outside the top 150 overnight. Its circulating market supply tripled from about 350 million to more than 1.4 billion in just two days.

Terra Labs had assembled around $3 billion in [Bitcoin](/coins/btc) to begin building a reserve. It wasn't nearly sufficient to stop the market drop. The company was compelled to vend its resources (against a Bitcoin market that has also lost significant value over the same course). Ultimately, there was no more $1 value of LUNA for every UST, implying both cryptos would drop altogether without any clear path to recovery.

UST is an algorithmic stablecoin. Eventually, its stability is naturally related to market volatility. When support for either related cryptocurrency becomes a problem, there is always a possibility that one or both will collapse and witness a market fall.

Now, with the value of UST still not redeemed to its $1, Terra is trying to raise the supply of LUNA to boost the burn rate and saturate the market with coins, putting more downward pressure on the crypto.

## Will Terra Luna recover?

Amid the market crash, Terra Labs CEO Do Kwon presented a Terra Luna recovery strategy to stabilise the present crypto destruction. According to his plan, he will work to stabilise the Layer-1 ecosystem.

The strategy is:

•	A new LUNA with a supply of 1 billion will be spread across the community
•	40% of this LUNA will be given to existing holders before the depeg
•	A further 40% will be given to present UST holders
•	10% will go to current LUNA holders
•	the last 10% will go to a community pool for development

This recovery strategy prioritises the Terra Layer-1 as Kwon and the community strive to protect the broader ecosystem.
Kwon said Terra Luna needs a growing community to make its blockspace valuable again.

"The only way to do this is to make sure that token holders before the attack commenced, the most loyal community members and builders, stick around to keep providing value," he added.

Right now, it is just a proposal to recover the Terra loss. The crypto market is highly volatile and we are left to wait and watch until the market stabilises.
 



Terra Luna Collapse: Why Did It Happen

The value of Luna plunged sharply on Wednesday, from $6.75 to a little over $1. As of Thursday afternoon, the currency was worth only $0.02. The sibling token of the controversial stable currency [TerraUSD](https://coinmarketcap.com/currencies/terrausd/) is now effectively worthless.

According to Coin Gecko statistics, Luna fell to $0 on Friday, a remarkable decline for a cryptocurrency formerly valued at more than $100. 

TerraUSD, sometimes known as UST, is designed to be tied to the US dollar one-to-one. When the UST decoupled from the dollar earlier this week, values plummeted. UST has lost its peg and was trading at 12 cents on Friday, according to statistics.

Traders prefer to acquire currencies such as [Bitcoin](/coins/btc), [Ether](/coins/eth), and [Dogecoin](/coins/doge) using digital assets tied to the dollar since only the price of the crypto asset changes when they buy or sell. 

## Stablecoins Rise in Popularity

Stablecoins enable quick trade without the lengthy settlement timeframes associated with government-issued currencies, which might take days. If a person wants to sell Bitcoin and immediately lock in their dollar winnings, they might do so by purchasing a stablecoin on major cryptocurrency exchanges.

UST and Luna are connected. UST is referred to as an algorithmic stable currency, which means there is an expectation that its $1 peg will be managed by the underlying code. This is fundamentally different from other stable currencies, such as tether and USDC, which are backed by real-world assets like bonds. UST has no real-world reserves. 

Algorithmic stablecoins are not backed by assets, instead relying on financial engineering to maintain their ties to the dollar. Previously, the algorithmic stable currency TerraUSD kept its $1 price by depending on traders to perform an arbitrage function between Terra and Luna values. 

When Terra went below the peg, merchants would "burn" the stablecoin, taking it out of circulation by swapping TerraUSD for $1 worth of fresh Luna units. This move lowered TerraUSD's supply and increased its price. When the value of TerraUSD soared beyond $1, traders might burn Luna and generate new TerraUSD, boosting the supply of the stablecoin and bringing its price back down to $1. Traders said a series of significant withdrawals from Anchor Protocol, a crypto bank established by developers at Mr. Kwon's business Terraform Labs, was the cause for the decline. It began during the 7-8 May weekend and spiralled out of control the following Monday. Digital currency investors use such services to earn interest on their coins by lending them out. 

The Anchor platform held most of the stablecoin's supply. According to the platform's website, investors had invested more than $14 billion in TerraUSD in Anchor by early May. Large trades eroded TerraUSD's $1 value during that May weekend. 

Because of the volatility, many investors withdrew their TerraUSD from Anchor and sold the coin. As a result, additional investors withdrew from Anchor, causing a chain reaction of more withdrawals and selling. TerraUSD deviated from its dollar peg as the supply-demand equilibrium was disrupted. Luna, its sister coin, has also seen its value fall. The crypto community speculates that an anonymous trader triggered the run as part of an "attack" on the stable currency. 

## Anchor TerraUSD Deposits Drop

According to the company's website, Anchor's TerraUSD deposits had dropped to around $1.6 billion on 13 May. The Terra blockchain, which underlies UST and Luna, has also stopped processing transactions twice in less than 24 hours, adding to the problems. Before the catastrophe, $14 billion in TerraUSD was placed in Anchor. There is less than $200 million remaining.
  
The Luna Foundation Guard may be running out of funds as well. Its crypto reserves are down to less than $90 million, and it has no Bitcoin in its wallet. The breakdown also impacted the Terra blockchain, which was momentarily unavailable on Thursday "to avoid governance assaults".

Meanwhile, Binance, the world's largest cryptocurrency exchange, delisted UST and Luna on Friday. Many traders have sold, believing that the assets would not be able to recoup their losses. Even Bitcoin fans have expressed concern. 
 
Nonetheless, the collapse spread. Luna's Bitcoin hoarding spread to other cryptocurrencies. Traders anticipating a TerraUSD breakdown appear to have sold Bitcoin, leading to the token's falls. This, in turn, undermined demand throughout crypto markets, which lost more than $400 billion in market cap as several tokens, including Bitcoin, Ether, Cardano, and Solana, fell by more than 20%.

The incident has also drawn policymakers' attention back to the absence of regulation around stable coins and the larger cryptocurrency sector. As TerraUSD broke from its peg on 10 May, Treasury Secretary Janet Yellen reiterated her appeal for Congress to establish laws governing stable currencies.


Why did TerraUSD and Luna Crash?

David Marcus will leave [Meta](https://about.facebook.com/meta/) (formerly Facebook) at the end of the year, with the company’s stablecoin project – Diem, formerly Libra, still not fully launched.

He confirmed he was stepping down as Meta’s crypto lead on Twitter.

The former president of PayPal joined Facebook as the vice president of the company’s Messenger division and took over the firm’s blockchain work in 2018.

Libra has faced regulatory scrutiny since its announcement in 2019, with Marcus becoming the face of the project in front of the US authorities.

## New Head for Novi

The project appeared to undergo cutbacks, with key staff leaving, before it was rebranded Diem. Recently, the Meta-owned cryptocurrency wallet subsidiary Novi launched a pilot that used the Paxos-administered USDP stablecoin instead of Diem.

Stephane Kasriel, also ex-PayPal, will be the new head of Novi

Confirming his departure on Twitter, Marcus said: ‘Personal news: after a fulfilling seven years at Meta, I’ve made the difficult decision to step down and leave the company at the end of this year.

‘While there’s still so much to do right on the heels of launching Novi — and I remain as passionate as ever about the need for change in our payments and financial systems — my entrepreneurial DNA has been nudging me for too many mornings in a row to continue ignoring it.

‘The one thing I’m the proudest of during my time here is the amazing kickass team we’ve assembled over the last three years. This is the most resilient, passionate, determined and talented group of humans I’ve ever worked with.

## Greatness Ahead 

‘I find comfort and confidence in knowing that they will continue to execute our important mission well under @skasriel’s leadership, and I can’t wait to witness this from the outside. I know there’s greatness ahead.

‘I’ll keep a special place in my heart for some of the most fun and stimulating years of my life building Messenger with so many talented people. In turn, the Novi years were the most mission-driven and intellectually stimulating ones.

‘I’m incredibly grateful to Mark for the opportunity and privilege to share a bit of the journey over the years. I’ll keep lifelong memories and friendships from my time at the company, and I wish it well in the years to come.

‘I now look forward to having more free time in the months to come before I start building something new and exciting again. Onward!’

Facebook Stablecoin Project Manager Quits

For many, cryptocurrencies are considered too volatile, especially when compared with traditional fiat currency. Fiat is a benchmark for pricing, a medium which can be used to buy and sell things. That is where [stablecoin's](/news/tag/stablecoin) come in.

A stablecoin offers the stability of fiat, combined with the borderless, peer-to-peer benefits of cryptocurrencies, as well as the full transparency of their movement.

This creates a unique bridge between the traditional economy and the growing crypto world, and that is why the national banks of many countries are considering their own digital currencies based on the stablecoin model.

[Central Bank Digital Currencies](/news/article/cbdc-uk) don’t fix the problems of fiat, especially the chief weakness of there being no cap on supply.

## What is a stablecoin?

An attempt to deal with the inherent volatility of cryptocurrency, the clue to a stablecoin’s purpose is in the name – stable.

They aim for stability by tracking both asset and currency values, alongside a specific fiat currency value, making a stablecoin as stable as the currency it tracks, and the mechanism used for the relationship with the underlying currency.

The most common currency used by stablecoin is the US Dollar and the first and still the biggest, stablecoin is Tether. 

Since it launched in 2014, more stablecoin's have followed, including ones based on the Euro, British Pound and Australian Dollar, as well as more volatile currencies like the Brazilian Real.

## Why are they useful?

Cryptocurrencies are volatile, with huge value changes possible day to day. To explain this, let's use [Bitcoin (BTC)](/coins/btc) and the Euro.

Imagine instead of buying your morning coffee for €4 every day you switched to paying by Bitcoin. As the price is constantly changing, the cost of your daily coffee would constantly change, sometimes up, sometimes down. This daily volatility isn’t seen with the Euro.

While over the long term the price of the coffee may actually work out less than you would have paid in Euros, that’s not much help when you need to budget day to day. Stability is necessary and uncertainty over price could see people spend less, causing economic damage.

The lack of uncertainty over price is a reason why many people are unwilling to spend or accept cryptocurrencies, preferring the predictability of fiat.

However, that doesn’t make fiat perfect. When you put your money in a bank, you lose control of it. If you want to transfer money across borders, you could face huge fees and delays. You may not have access to banking, or live in a nation with high inflation, removing your link to a stable fiat currency.

This is where stablecoin's become useful. They bring together the stability of fiat with the decentralised, global characteristics of cryptocurrencies.

## How do they work?

Just like any other cryptocurrency, stablecoin's are entries on a global shared digital ledger that can be transacted on decentralised, peer-to-peer global networks. 

Most run on established blockchains, like Ethereum, enabling stablecoin's to be launched relatively easily. There’s no real difference between trading ether (ETH) and an Ethereum-based stablecoin.

Stability is at the core of this offering, and there are different ways of achieving that. For example:

- Fiat collateral-based
- Crypto collateral-based 
- Algorithmic-based seigniorage
- Central Bank Digital Currencies (CBDCs)

## Fiat collateral-based stablecoin's

The first model to be used, the most prevalent and the most straightforward way to achieve stability. This method makes each unit of the stablecoin a representation of a unit of the fiat in the bank.

This means that each unit of this type of stablecoin is just a representation of an existing unit of fiat currency in its issuer’s bank account, and the supply is dictated by how much is on the bank account. If new stablecoin units are to be issued, more fiat must go into the bank.

This type of stablecoin can be based on commodities other than money, such as gold and silver.

Examples of this type of model include Tether, [Gemini](/news/article/gemini-crypto-review), [Paxos](/news/article/circle-paxos-crypto-approval-singapore), and TrueUSD, all matched with the US dollar, Digix, which is backed by gold, and Globcoin, which is based on a basket of currencies.

## Crypto collateral-based stablecoin's

The consolidation of crypto markets has paved the way for a class of stablecoin collateralised entirely on crypto assets.

It uses smart contract technology, reducing reliance on companies and human behaviour, to create a purely on-chain stablecoin based on the value of the underlying cryptocurrency (or cryptocurrencies).

Unlike fiat-based stablecoin's, this type requires over-collateralised deposits so that any fluctuations in value of the underlying crypto don’t cause an issue.

DAI was the first and crypto collateral-based stablecoin.

Initially, Ether (ETH) was the only cryptocurrency accepted as collateral, but later crypto collateral-based stablecoin's have adopted a multi-collateral approach, which means can deposit many other Ethereum-based tokens as collateral.

## Algorithmic-based seigniorage stablecoin's

In this model, the stablecoin tries to mirror the traditional central bank mechanism, but using smart contracts that try to adjust supply in circulation based on demand for the currency.

It tries to maintain price levels by issuing more tokens when demand is high, via interest-bearing shares, and removing tokens when demand falls, using a system of redeemable bonds and automated buybacks.

As the expectation is that the mechanism will keep the stablecoin stable, this model does not have an underlying asset, unlike collateralised models. However, this is an experimental and largely unproven concept, and has attracted negative attention from regulators.

Very few projects exist, such as Bdollar, and usually with limited circulating supply.

## CBDCs

As cryptocurrencies become viable and an efficient alternative to traditional payment systems and start to be used in more areas of the economy, winning over ever more sectors of the economy, it’s inevitable governments will want to get involved.

This is where we see central bank digital currencies. CBDCs are not cryptocurrencies or stablecoin's, but include features of both. They are stable, as a re-engineered form of a national currency, and include elements you’d see in cryptocurrency.

Think of them as a hybrid of a cryptocurrency, like bitcoin, and a fiat currency. Most CBDC proposals use a blockchain or other distributed ledger system (DLT) to keep a single ledger of payments and transactions, like crypto. 

This allows greater efficiency and gives the central bank a single ledger to account for money supply while also reducing reliance on commercial banks for issuing new money into the economy.

As they come online, CBDCs are expected to be permission networks – unlike the open nature of true crypto networks – as governments don’t like to give up control. This means validation of transactions will likely remain with regulated bodies, possibly including the private sector.

Again, unlike crypto, money supply and monetary rules are likely to stay controlled much like fiat currencies today are, albeit with more direct control by the central bank.

It is still too early to know too much for sure with CBDCs and, in the meantime, stablecoin's do a good job of bridging the gap between fiat and crypto.

## The Future

Stablecoin's are a fast-growing type of cryptocurrency and without the price stability they bring, it would be hard for cryptocurrencies to offer complex financial instruments, like loans, and become a bigger part of the global economy.

There remain challenges to cryptocurrencies becoming part of the mainstream, including regulation.



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