Mark Cuban calls for regulation of stablecoins after Iron Finance suffers ‘bank run’

The bank run on the Iron Finance deal cost Mark Cuban dearly.

Billionaire investor and DeFi backer Mark Cuban has called for regulation of stablecoins after suffering losses on the Iron Finance protocol, which he called a “rug pull” (“rug pull” refers to projects that package themselves to scam users into pledging and investing, and then immediately run away with the money).

According to Iron Finance, the partially collateralized stablecoin project was the subject of a “historic bank run” that caused the price of the IRON stablecoin to fall off the peg. As a result, the price of Iron’s native token TITAN plummeted almost 100% from its all-time high of $64.04 in two days.

In a June 17 interview with Bloomberg, Cuban accused himself of being “lazy” and not doing enough research, but also raised questions around the regulation of stablecoins.

“Regulation should define what a stablecoin is and what kind of collateral is acceptable. We should require a 1:1 anchor to the dollar or define acceptable collateral options, such as U.S. Treasuries.”
Cuban said, “As experienced as I am in this area, I’m really lazy. a play like DeFi is mostly about returns and math, and I’m too lazy to figure out what the key metrics are.”

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    Kraken CEO Jesse Powell lashed out at Cuban on Twitter, stressing that the lack of stablecoin regulation is not the problem:.

“Your problem is that your time is more valuable than your money and you’ve made yourself a bad investment by not doing your own research.”
Stable Coin Regulation
The stablecoin industry is currently under the scrutiny of U.S. lawmakers, who are considering how to regulate the fast-growing industry.

In December 2020, the U.S. introduced the Stable Coin Act (STABLE Act), which requires stablecoin issuers to obtain a bank charter and comply with traditional banking regulations.

Following last month’s crypto market downturn, Federal Reserve Chairman Jerome Powell emphasized on May 20 that “as the use of stablecoins increases, we must focus on an appropriate regulatory and supervisory framework.”

Iron Finance highlights fractional reserve issues
In a blog post titled “Iron Finance Post-Mortem 17 June 2021,” the project noted that it plans to hire a third party to conduct an in-depth analysis of the agreement in order to “understand all the circumstances that led to this outcome.

IRON is a partially collateralized stablecoin designed to be anchored 1:1 to the price of the U.S. dollar. The coin is backed by both its native token, TITAN, and the USDC stable coin, whose ratio to total IRON supply is known as the collateral ratio (CR).

The IRON stablecoin also fell below $1 after a massive whale sell-off caused TITAN’s price to drop by about $30.

The protocol relies on a time-weighted average price (TWAP) algorithm to determine the CR, and its market activity exceeded the CR due to its inability to keep up with market volatility.

Whale purchased IRON for $0.90 and converted it to $0.25 TITAN and $0.75 USDC, which temporarily pushed the price of TITAN up to around $50. Then they started to cash in their profits, causing the price to plummet.

This triggered a “panic event” or “bank run” by other investors, who also began to cash out, causing the price of TITAN to fall to near zero today.

Mark Cuban calls for regulation of stablecoins after Iron Finance suffers 'bank run'

TITAN price chart: CoinGecko

The blog writes: “Remember, Iron.finance is a fractional collateralized stablecoin, similar to a fractional reserve bank in the modern world. When people panic and run to the bank to take out their money in a short period of time, the bank may collapse.”

I suffered the same losses as everyone else. The crazy thing is, I thought they raised the TVL.
— Mark Cuban (@mcuban) June 16, 2021
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