Why Crypto Needs to be Linked to Real World Assets?

  • Alan Vaksman, Founder and Managing Partner at Digital Horizon

  • 16.05.2022 11:30 am
  • #crypto

“The collapse in the price of so-called stablecoins like Luna and UST has echoes of the 2008 financial crash. Back then, CDOs brought the global economy to its knees because the belief was they were mortgage-backed securities. It was in fact a mortgage-backed pyramid with no real security behind it.

“A similar phenomenon is at play now - and offers further evidence of why we need to link crypto to real collateral and real-world assets. These stablecoins were not linked to real assets but instead backed by algorithmic code, or a convoluted pyramid of other crypto assets. As a result they have suffered as they were de-linked from the US Dollar.

“DeFi and stablecoins as an idea are not the reason for these collapses. It is what is behind them. Linking cryptocurrencies to real world assets is key, if we are to avoiding a repeat of what we’ve seen recently. This will be an important step in bolstering a sector still viewed by many as the Wild West.

“Linking crypto to real world assets would also be a positive move for the wider economy. Right now there are billions sat in stablecoins doing nothing except serving as a crypto trade “cash account”. If these coins were linked to real world assets, such as property or loans, it could provide a much-needed stimulus to economies currently wrestling with growth."

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