Legal & Regulation
“This One is on Mark Cuban,” says CT as He Calls for DeFi Regulation After Getting Rug Pulled on His Promoted Project
Billionaire investor Mark Cuban calls for the regulation of the cryptocurrency sector after the debacle with the algorithmic stablecoin Iron Finance.
As we reported, the TITAN token of Iron Finance lost 100% of its value going from $60 to $0 after users started cashing out, sending the prices crashing.
This wasn’t the first time that an algorithmic stablecoin project has failed while the community is still trying to experiment with just how such a mechanism can work.
I couldn’t even begin to predict what will happen to the next algo stablecoin, I just appreciate them as they come pic.twitter.com/OXUHQOVoEo
— Elmo’s Pool 2 Fund (@0xElm0) June 17, 2021
Cuban, the Dallas Mavericks’ owner, was among those who provided liquidity to the project. Just last week, Cuban prompted the project in a blog post, which could have aided in the huge runup in the price of the token.
After the incident, Cuban acknowledged that he got hit like everyone else, adding, “Crazy part is I got out, thought they were increasing their TVL enough. Than Bam.”
Now, he wants the regulators to define what a stablecoin is and is calling for regulation. He wrote to Bloomberg,
“Even though I got rugged on this, it’s really on me for being lazy. The thing about de fi plays like this is that its all about revenue and math and I was too lazy to do the math to determine what the key metrics were.”
He shared how he read about it and decided to try it out and when the total value locked (TVL) in it started to rise, he went back in because his investment in it as a percentage of his crypto portfolio was small.
“But it was enough that I wasn’t happy about it,” he added.
Now, the lesson learned here, according to him, is that this sector needs regulation.
“The real question is the regulatory one…There should be regulation to define what a stable coin is and what collateralization is acceptable.”
Algorithmic stablecoins don’t rely on the claim they’re worth a dollar. Instead, algorithmic stablecoins hope to maintain parity with minimal deviations. These stablecoins are science experiments, and should be traded as such, and not as stablecoins. https://t.co/IQMIH5qInr
— Alex Krüger (@krugermacro) June 18, 2021
With so many players involved in this lucrative business, Cuban wants regulators to cover everything — What is a stablecoin? Should there be one physical USD for every dollar like US treasuries? What are the acceptable collateralization options?
“Probably given stable coins most likely need to get to hundreds of millions or more in value in order to be useful, they should have to register.”
While this may be the first time Cuban decided to ape in, it certainly wasn’t the first time for the crypto community, and they have had several such mishaps and rug pulls. Just today, Polygon-based BeetsFarm got rugged for about $100k and counting.
Cuban was responsible for doing his own research (DYOR), as per the Crypto Twitter (CT).
Stablecoins didn’t need regulation before Mark got rugged.
Stablecoins don’t need regulation after Mark got rugged.
And @mcuban please remember what the “de” in “defi” means, now that you are involved in it. https://t.co/BebuBDJsoI
— Erik Voorhees (@ErikVoorhees) June 17, 2021
“This stuff is already regulated, that coin is more likely than not an unregistered security, you should have known it, and you bought it anyway,” said Preston Byrne, partner at Anderson Kill law firm.
“Don’t call for more regulation just because your crypto investment team doesn’t know what they’re doing. This one is on you.”
AnTy has been involved in the crypto space full-time for over two years now. Before her blockchain beginnings, she worked with the NGO, Doctor Without Borders as a fundraiser and since then exploring, reading, and creating for different industry segments.