Bank of America called the reason for Terra’s collapse

According to the bank’s analysts, the project team was focused on adopting the UST stablecoin rather than maintaining its rate

22.05.2022 - 06:30

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What’s new? The Bank of America (BofA) has called a possible reason for the collapse of the Terra ecosystem. According to the bank’s analysts, the project team was focused on adopting the TerraUSD (UST) stablecoin rather than maintaining its rate. Experts added that UST was not backed by traditional assets, CoinDesk reports, citing a note from the bank.

Information on the CoinDesk website

What else did the bank say? The BofA considers the stablecoins market to be resilient, as the loss of the UST’s peg to the US dollar has not affected the rates of other similar coins. The ban on algorithmic stablecoins as a whole is considered premature by the bank’s representatives, experts still see potential in this asset type.

What events happened before? Analysts at investment bank Goldman Sachs explained that for the viability and long-term prospects of algorithmic stablecoins, they need to find a wider application for payments in the real economy. The bank also noted that the recent collapse in the cryptocurrency market would not have a significant long-term impact on the US economy. US Treasury Secretary Janet Yellen believes that the cryptocurrency market has not yet grown to such a scale that it poses a “systemic risk.”

After Terra collapsed, the South Korean Tax Service accused Terraform Labs CEO Do Kwon of tax evasion to the tune of $78,4 million. And on May 20, it became known that Kwon liquidated the Terraform Labs legal entity on April 30, days before the collapse of the UST rate. For a detailed timeline of events, see the link in GetBlock Magazine’s article

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