Mark Cuban, the billionaire investor and owner of the Dallas Mavericks that has begun dabbling in bitcoin and crypto, has called for regulation of burgeoning decentalized finance (DeFi) space.
Cuban issued the call to regulators after he put money into an algorithmic stablecoin that collapsed, telling Bloomberg there “should be regulation to define what a stablecoin is.”
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Stablecoins—a type of cryptocurrency that’s pegged to an asset, usually the U.S. dollar—have rocketed in recent years, with the largest stablecoin, tether, now boasting a market capitalization of $62 billion. Meanwhile, DeFi, using cryptocurrency technology to recreate financial products such as loans and insurance without the need for bank, has surged in popularity over the last year, helping the price of ethereum, the blockchain on which most DeFi projects are built, to soar.
DeFi stablecoins, often attempting to hold a peg to fiat currencies by creating arbitrage opportunities and liquidity between coins, are nortiously risky with a myriad of similar projects collapsing recently.
“There should be regulation to define what a stable coin is and what collateralization is acceptable,” said Cuban.
Cuban hasn’t revealed how much he lost on the project, telling Bloomberg that “as a percentage of my crypto portfolio it was small … but it was enough that I wasn’t happy about it.”
“I got hit like everyone else,” Cuban told a fellow DeFi investor via Twitter who suggested Cuban had been “rugged”—when project liquidity drys up and investors are unable to withdraw cash.
Cuban—who revealed in March that 60% of his crypto holdings are in bitcoin, 30% in ethereum, and 10% in other coins—has recently begun experimenting with DeFi, writing this month in a blog post that “banks should be scared” of the largely unregulated and burgoning technology.
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“It is important to note the pivotal role of stablecoins that are pegged to fiat currency in this emerging ecosystem,” Paolo Ardoino, the chief technology officer at both stablecoin issuer Tether Limited and bitcoin and cryptocurrency exchange Bitfinex, said in emailed comments.
“All tokens are not created equal. In some projects, there is a risk that everything goes to zero. We urge those investing in the ecosystem to educate themselves in these new financial projects. Never invest what you’re not…