Zhao: Algorithmic Stablecoins May Be Trending Again
According to Binance CEO Changpeng Zhao, the cryptocurrency industry will start using euro, Japanese yen or Singapore dollar-based stablecoins in the future, reducing its reliance on US dollar-based stablecoins.
Speaking at the Twitter Spaces event, Changpeng Zhao answered a question about the cryptocurrency industry using gold as the standard of value instead of the US dollar. The CEO of Binance reminded that it makes sense to use gold, but most people make the majority of their payments in fiat currency, noting that most people calculate their return on investment in US dollars, which is why US dollar-backed stablecoins are “still important.”
Zhao argued that the recent actions of the US administration against stablecoins pegged to the US dollar will likely result in the global crypto industry relying on other currencies such as the euro, Japanese yen or Singapore dollar to support stablecoins:
“I think, given the current pressure and current attitudes of regulators on US dollar-based stablecoins, I think the industry will likely move towards non-US dollar-based stablecoins as you said. As a result, probably more euros or Japanese yen, Singapore dollar-based stablecoins. We will see future developments. So the attitude of the US administration actually pushed us to look for more options in different places.”
It was noteworthy that the CEO of Binance predicted that algorithmic stablecoins could also play a larger role in the crypto money ecosystem in the future. He also warned that algorithmic stablecoins “will inherently have risks” that fiat-backed stablecoins do not. According to CZ, these risks need to be transparently disclosed to users, and reserves for fiat-backed stablecoins also need to be disclosed. In this way, “users can decide very clearly what is going on” and decide which stablecoins they want to hold or use.
Algorithmic stablecoins TerraUSD (UST) lost a lot of confidence in May 2022 as it lost its peg to the US dollar in May, causing investors to lose over $20 billion. CZ’s remarks come just a day after the SEC filed charges against the US dollar-based stablecoin Binance USD (BUSD) as an unregistered “security” under US law.
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