Tether CTO Paolo Ardoino compared the algorithmic stablecoin TerraUSD (UST) to a “card lock” that should crash at any moment. According to him, the product is simply “badly designed”.

CTO @Tether_to, @paoloardoino over $UST:

“Everything is fun and games until there are 10 billion stablecoins. And then the faster you grow, the harder it gets, right, because if you’re a stablecoin, especially an algorithmic stablecoin..” https://t.co/UNuvNhZoP9

— REIMAGINE — Web3 Events and Media (@REIMAGINE_2021) 18 May 2022

“I don’t know Do Kwon. But let’s give him the benefit of the doubt. He created this project out of arrogance and with the belief that he was right, and many supported him, of course, for economic reasons. However, the project itself was not true. It was poorly designed like the others,” he said on the Reimagine podcast.

According to Ardoino, he and many other experts realized that launching UST was a “bad idea”. The coach stressed that Kwon himself was aware that this “card lock” could collapse at any moment, but he did not have the opportunity to make it public.

Earlier, CTO Tether said that algorithmic stablecoins like TerraUSD are dangerous for the market. He echoed this idea on the podcast.

According to Ardoino, the UST was unable to maintain parity with the US dollar due to its high capitalization, as collateral was not sufficient to correct the situation in a volatile market.

However, the sale of BTC from the Luna Foundation Guard reserve fund has put enough pressure on the bitcoin price to “further crash the market.”

“Essentially, they found themselves in a gradual situation where the need to protect the pair forced them to sell collateral, causing additional collapses. [котировок]which forced them to sell even more collateral,” Ardoino explained.

He stressed that the collapse of the UST would draw more attention to the segment from regulators. However, in his view, since stablecoins like USDT are fully backed by reserves, politicians need to properly classify assets first.

Recall that in the first quarter of 2022, the issuer of the stablecoin USDT – Tether Holdings Limited – reduced its reserves in commercial securities by 17%. By the end of the second quarter, the company plans to reduce the amount of collateral on these assets by another 20%.