Terra plans to buy and hold up to $10 billion worth of Bitcoin, a massive amount of the flagship cryptocurrency that Terraform Labs says will be used to support the stablecoin TerraUSD (UST).
Rather than holding cash reserves and other cash equivalents, Terra plans to hold enough BTC to support all of the UST in circulation.
That is essentially the main script surrounding Terra’s plan to buy BTC worth up to $10 billion. CNBC posted a commentary on Terra early Tuesday.
Terra’s UST Plans Add Bitcoin Demand
On Monday, Terraform Labs founder and CEO, Do Kwon, revealed that the company had purchased $135 million worth of BTC, bringing Bitcoin purchases to $1 billion by 2022.
In a previous comment about the move to buy as much Bitcoin as possible, Kwon said:
“UST with $10 billion in BTC reserves will open a new monetary era of the Bitcoin standard. P2P electronic money that is easier to spend and more attractive to hold Bitcoin”
UST, like other stablecoins, is pegged 1:1 to the US dollar and has a relatively stable value even as markets experience massive volatility. However, this stablecoin aims to move from a decentralized, algorithmic currency backed by cash reserves and other equivalents to one backed by Bitcoin.
Indeed, one of the stories that has pushed Bitcoin higher in recent days is aggressive accumulation by whales. Bitcoin jumped to highs of over $48,000 on Monday, bringing its 30-day gains to over 20% and turning positive year-to-date value.
Terra’s LUNA also gained strongly, breaking from around $90 to a high above $106 in the past week. Meanwhile, UST’s market cap soared to over $16 billion to make it the 14th largest crypto project.
A CNBC report on Terra’s big bet on Bitcoin and UST says some analysts are warning it “may not sit well” with US regulators. This is because regulators have previously expressed concerns about stablecoins and their potential to pose risks to the financial system.
And while Treasury Secretary Janet Yellen recently said the US would try to provide a regulatory framework that supports crypto innovation, concerns about stablecoins remain.
In 2021, the SEC sued Terraform Labs and CEO Do Kwon over allegations of violations of US law. Kwon sued the SEC and earlier this year a US court ordered Terra to comply with the subpoenas.
Could UST attract more attention now? Possibly, according to analysts quoted by CNBC, with all the likely developments to come, even if lawmakers want to expedite the development of a digital dollar.