UST is a so-called algorithmic stablecoin, meaning that it’s not backed by assets like cash or cash-equivalents. Instead, it relies on trading and treasury management to maintain its value.
The backers of the TerraUSD are trying to raise about $1.5 billion to shore up the token after it crashed from its dollar peg, according to Kumar Gaurav, the founder and chief executive of crypto liquidity provider Cashaa.
The whole episode demonstrates the need for “some kind of framework” to assure investors that stablecoins are in fact stable, Senator Mark Warner said in an interview on Tuesday.
“Frankly, maybe this disruption in the market may take some of the some of the air out of this very overheated balloon,” said Warner, a Virginia Democrat.
-With assistance from Steven T. Dennis, Suvashree Ghosh and Emily Nicolle.
This article was provided by Bloomberg News.