The Monetary Authority of Singapore (MAS) has issued a statement about cryptocurrency and stablecoins following the Terra Luna fiasco.
Two tokens -- UST (TerraUSD) and Luna -- from the cryptocurrency project lost most of their value, 70 per cent and 95 per cent respectively, within days.
If you would like to understand a little bit more about UST and Luna and how this entire fiasco unfolded, this opinion piece in Bloomberg is both easy to read and enlightening.
According to The Business Times, MAS warned that while stablecoins are marketed as having stable value, hence the name "stablecoins", they have experienced fluctuations in market price.
Stablecoins are considered less volatile in general because they are typically pegged to dollar or cryptocurrency collateral.
But as the Terra Luna experiment has shown, they are subjected to bank runs and price crashes in the event holders engage in mass sell-offs.
“MAS has consistently warned the public on the risk of trading in cryptocurrencies. Cryptocurrencies are highly volatile and often not anchored on economic fundamentals. This means that it is highly risky and not suitable for retail investors.”
BT also reported that the central bank is reviewing regulatory measures with regard to stablecoins.
Top image: MAS.
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