The UST meltdown doesn’t mean stablecoins are doomed.
. Eventually Terra’s blockchain was frozen, it was delisted from most major exchanges, and Luna coin’s value declined to zero.But that doesn’t mean stablecoins themselves are a doomed concept, says Ian Epstein, president of Enigma Securities, a digital broker-dealer serving institutional wealth clients.“We should talk about what I think of as a stablecoin versus what is really another bad idea dressed up as a stablecoin,” said Epstein.
“We see all the time emerging markets that have a peg to the U.S. dollar, but where the liabilities of the central bank do not equal the assets side of their balance sheet, their reserves,” said Epstein. “That puts excess pressure on the peg and causes the devaluation of their currency.”When Terra’s asset balance tipped too far towards liabilities, it caused the digital economy equivalent of a “run on the bank,” said Epstein.
From a broker-dealer perspective, Epstein sees the value potential in a stablecoin serving as a transparent, fully backed digitized money market fund. “There’s great transparency and ease in subscribing to it and it provides a great value, as will other true stablecoins similar to USDC that will come about in other currencies over the next six to 12 months.”
Others, like AdvisorBId founder Brandon Spotswood, think that the collapse of Terra and issues with other stablecoins will bring in stricter regulation and may cause central banks to accelerate work on their own digital currencies.It might be hard to wrap your brain around institutional interest in decentralized finance , technology built to disintermediate the financial transactions that have built many of the world’s financial institutions, but Epstein said the interest is there.
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