A top IMF official said cryptocurrency investors should not flee the market after the Terra ecosystem tokens crash.
Following the collapse of Terra ecosystem tokens in the past few weeks that resulted in great losses, many feared that the resultant effect could be a widespread capitulation.
In what may come as a shock to many, a top financial regulator with the International Monetary Fund (IMF) has urged cryptocurrency community members not to desert the market based on the Terra incident.
Speaking at the World Economic Forum’s annual meeting in Davos, as reported by Bloomberg, Kristalina Georgieva, IMF’s Managing Director, has pleaded with the crypto community not to completely shun investments in the sector.
Georgieva acknowledged that global regulators have not lived up to expectations in protecting cryptocurrency investors, as they were supposed to offer “guardrails” in the form of regulation while educating people about the associated risks with cryptocurrencies.
“I would beg you not to pull out of the importance of this (crypto) world, It offers us all faster service, much lower costs, and more inclusion, but only if we separate apples from oranges and bananas, it’s the responsibility of regulators across the globe to put up guardrails and offer education to protect investors.”
Georgieva Speaks About Terra’s Collapse
Commenting on the collapse of TerraUSD (UST), the algorithmic stablecoin of the Terra ecosystem, Georgieva noted that there is a difference between stablecoins backed by fiat and those that are backed by algorithms to maintain their values.
“The less there is backing it, the more you should be prepared to take the risk of this thing blowing up in your face,” Georgieva said.
For the IMF Managing Director, the fact that Terra tokens collapsed the way they did does not mean people should tarnish all digital currencies using the same brush.
Other Financial Regulators Comment on Terra’s Incident
Aside from Georgieva, other financial regulators also spoke about the recent collapse of the cryptocurrency market.
Francois Villeroy de Galhau, France’s Central Bank Governor, while commenting on the collapse of Terra’s ecosystem tokens, said:
“My impression is that in recent weeks, citizens have lost trust in crypto, more than in central banks.”