Critics see risk in ‘algorithmic’ stablecoins

An algorithmic stablecoin called TerraUSD is now the third-largest stablecoin by market value, according to sites that track such value. — dpa

WASHINGTON: A new type of digital asset called an algorithmic stablecoin is gaining steam among crypto-enthusiasts — and drawing steam among critics, who warn its risks are in plain sight.

Algorithmic stablecoins use market incentives, controlled by the algorithms that give the cryptocurrency its name, to maintain a stable price against a currency such as the dollar, rather than backing the price with assets like cash or Treasury securities, as other stablecoins do.