Curve Stablecoin Is in the Works, Despite Regulatory Scrutiny

The news comes as regulators around the world continue to consider how to deal with the aftermath of TerraUSD’s collapse

article-image

Source: Shutterstock

share

key takeaways

  • Curve CEO Michael Egorov said the company is looking to launch its own stablecoin
  • Overcollateralized stablecoins have reserves of cryptocurrency tokens or other assets that exceed the number of stablecoins issued, providing, in theory, a buffer against price fluctuations

Exchange liquidity pool Curve is looking to launch its first native stablecoin, joining a number of institutional market players vying to seize market share following the recent, sudden and spectacular blow-up of Terra’s UST stablecoin. 

The firm’s chief executive, Michael Egorov, in a virtual appearance Thursday said the stablecoin is slated to be overcollateralized. TerraUSD — the implosion of which sent digital-asset markets spiraling to the extent many a trader has yet to fully recover — has come under fire, in part, for not maintaining sufficient collateral to hold its one-to-one peg to the US dollar. 

“That’s all I can say for now,” Egorov said, without specifying a launch date.

Overcollateralized stablecoins have reserves of cryptocurrency tokens or other assets that exceed the number of stablecoins issued, providing, in theory, a buffer against price fluctuations. It’s a similar setup to bitcoin-denominated loans, which most always require the debtor to pony up far more of the cryptocurrency than, in theory, is needed to back the line of credit in question.

Egorov did not elaborate on specific assets set to serve as reserves for the new product. Stablecoins are typically backed by the dollar, the euro or other liquid and mainstream fiat currencies. Other stablecoins, including Tether, have faced scrutiny over a lack of transparency and the prospect of investing customer stablecoin funds in relatively illiquid assets. 

The planned launch comes as regulators worldwide — perhaps most notably, US Treasury Secretary Janet Yellen, who has called for stablecoins to be strictly overseen in a manner akin to FDIC-insured banks — amp up processes for stablecoin rulemaking in the aftermath of TerraUSD’s collapse. 

“UST was collateralized by LUNA, which ultimately depends on the success of UST,” Egorov said. “That exposed UST to the death spiral.” 

The International Organization of Securities Commissions (IOSCO) and the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) earlier this month issued their, for now, final guidance on best stablecoin practices. 

“The recent market disruptions, while costly for many, were not systemic events,” Jon Cunliffe, chair of the CPMI and deputy governor for financial stability at the Bank of England, said in a statement, presumably referring to UST’s depeg in May.

If a stablecoin serves as a mechanism for transferring monetary value — and is deemed “systemically important” to financial markets — it must, in the BIS’ view, abide by a specific set of international standards put in place in the wake of the global financial crisis of 2008.

Regulators in the US say they’re especially concerned when it comes to transparency and guidelines around stablecoin reserves. ​​“If you just look at the events in April and May, basically the question everybody asked was ‘What are these stablecoins? Are they really stable? What is backing it?,’” Wolfgang Bardorf, senior vice president and group treasurer of Checkout.com, said during a recent Blockworks webinar.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Tags

Upcoming Events

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Screen Shot 2024-05-16 at 14.53.45.png

Research

Loss-versus-rebalancing (LVR) is arguably Ethereum DeFi’s biggest problem, and thus reducing LVR is fundamental to the success of Ethereum. This report dives into the world of LVR. We uncover its importance for AMM designers, discuss the two major mechanism design categories and various projects developing solutions, and offer a higher level perspective on the importance of AMMs in general.

article-image

Yesterday saw Congress’ upper chamber side with the House on a measure aimed at overturning SAB 121

article-image

Oklahoma’s new crypto bill will go into effect in November of this year

article-image

The deposits hit a $20 million cap in just 45 minutes

article-image

Twelve Democratic Senators voted in favor to pass the resolution Thursday

article-image

Pump.fun is “aware” that bonding curve contracts on Pump.fun were exploited, and has since paused trading

article-image

Some investment pros are mulling crypto allocations between 1% and 10% and seeking ex-BTC exposure for interested clients