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Terraform Labs’ UST Stablecoin 'Broke the Buck'

How the naysayers were right about UST, and why it matters for investors.

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This episode is sponsored by EY.

UST, the algorithmic stablecoin created by Terraform Labs, was de-pegged this week from the U.S. dollar.

UST's price initially dropped from a one-to-one U.S. dollar value to 60 cents and then fell further. The cause of the de-pegging is due to the sell-off in crypto and in financial markets. The price drop in UST highlights the risks associated with cryptocurrencies and their volatility, which further poses the question of when regulators will step in. U.S. Treasury Secretary Janet Yellen had a few remarks concerning the de-pegging and reaffirmed to the world that the Fed is watching.

Join “Money Reimagined” host Michael Casey with Circle CEO Jeremy Allaire, the lead manager of USDC, a prominent stablecoin backed by dollar-based liquid assets, and CoinDesk technology reporter Sam Kessler as they discuss this complicated issue of how the UST peg system is supposed to work and what really went wrong.

After UST lost its peg to the U.S. dollar, $1.5 million of bitcoin reserves was used to defend the peg. Is the underlying algorithm sufficient to keep the token at a stable rate of one dollar? What are the alternatives? Are there other models, collateralized models that would be more effective?

Allaire further explains on how the structure of Circles model may offer more stability and security to investors.

- Recorded on Tuesday, May 10, 2022.

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This episode was produced and edited by Michele Musso with announcements by Adam B. Levine. Our theme song is “Shepard.”