Kristalina Georgieva, the Managing Director of the International Monetary Fund, said that stablecoins not backed by real-world assets are “pyramids” and “pyramids are bound to fall.”
Speaking at the World Economic Forum, Georgieva expressed her views about cryptocurrencies and spoke about spreading awareness about them in public.
Georgieva said, “It is our responsibility to explain to people, what is Central Bank Digital Currency, what is stablecoin, what is the difference between real stablecoins and ‘non-stable’ stablecoins.”
Stressing on stablecoins, one of which was the primary trigger of the recent crypto crash, Georgieva expressed her views on algorithmic stablecoins, calling them “pyramids that will fall.”
She said, “If a stablecoin is backed one to one with assets, it is a ‘stable’ stablecoin. When it is not backed with assets, but promises to deliver 20 per cent returns, it is a pyramid. And what happens to pyramids, they eventually fall.”
It is worth noting that stablecoins are cryptocurrencies pegged to external variables. They may either be pegged to commodities or fiat currencies, etc.
Some stablecoins, hold actual reserves of the external variable they are pegged to. Whereas, other stablecoins do not have any such reserves and are algorithmically managed to their peg. TerraUSD was an algorithm controlled stablecoin.
Talking about what the next priorities of regulators should be when it comes to cryptocurrencies, the IMF chief said, “Regulating stablecoins, ensuring the interoperability of CBDCs, and recognising that Bitcoin may be called a ‘coin but it is not real money, is what we need to work on.”
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