People shouldn\u2019t completely shun the crypto world after the recent collapse of a popular stablecoin, an official at the International Monetary Fund said Monday.<\/p>\n
TerraUSD, or UST, imploded earlier this month, setting off a chain reaction that saw the overall value of the cryptocurrency market slashed by hundreds of billions of dollars.<\/p>\n
\u201cI would beg you not to pull out of the importance of this world,\u201d said Kristalina Georgieva, the IMF\u2019s managing director, said at the World Economic Forum\u2019s annual meeting in Davos. \u201cIt offers us all faster service, much lower costs, and more inclusion, but only if we separate apples from oranges and bananas,\u201d she said, adding that it\u2019s the responsibility of regulators across the globe to put up guardrails and offer education to protect investors.<\/p>\n
Georgieva noted that there are many different types of assets with varying levels of associated risk. For instance, there\u2019s a big difference between stablecoins that are backed by cash and other assets and those that rely on algorithms to maintain their value, like the Terra coin, she said. Stablecoins are a type of cryptocurrency that are supposed to maintain a 1-to-1 value to a reserve asset like the US dollar.<\/p>\n
\u201cThe less there is backing it, the more you should be prepared to take the risk of this thing blowing up in your face,\u201d Georgieva said. But she added that not all digital money should be tarnished with the same brush.<\/p>\n
Georgieva was speaking alongside other members of the world\u2019s financial elite on a panel discussing central bank digital currencies. Francois Villeroy de Galhau, governor at the Central Bank of France, dismissed concerns that central banks are slowly losing people\u2019s trust as cryptocurrencies and decentralized finance rise in popularity.<\/p>\n
\u201cMy impression is more that in recent weeks, citizens have lost trust in crypto, more than in central banks,\u201d Villeroy said, referring to Terra\u2019s collapse.<\/p>\n