With built in pseudo-anonymity, algorithmic regulation technology establishes the possibility of money laundering and identity manipulations, just like the ones that challenge NFT markets. All too often, we overlook the fact that rule of law ensures fairness, equality and above all, provides redressal mechanisms for the same.
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EARLIER this year, the largest cryptocurrency exchange, Binance promoted a new cryptocurrency called TerraUSD and its sister token LUNA, collectively called ‘Terra-LUNA’. The token was part of a cohort of coins called ‘stablecoin‘, a type of cryptocurrency that is designed to maintain a pegged value, in this case equivalent to USD 1. However, unlike a reserved stablecoin, which is backed by fiat or gold, “algorithmic” stablecoins like LUNA are pegged with another cryptocurrency, the supply of both being subject to various fluctuations.
In this case, Terra-LUNA claimed to offer stability and the promise of annual returns of almost 20 per cent, allegedly making it low risk and high yield.
As it turned out, Terra-LUNA was neither.
Terra-LUNA collapsed when crypto ‘whales’ or investors started offloading LUNA in large amounts after new tax regulations impacted the market as a whole. In what some call the year’s biggest crypto-Ponzi scheme, the collapse of LUNA was a harbinger of the ongoing market crash. It sent Binance users into a Kafkaesque spiral, with an equivalent of USD 1.6 billion LUNA that…
