by Christy Bieber | Published on Sept. 18, 2021
Many or all of the products here are from our partners. We may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
Cuban's personal financial losses influenced his opinion.
In June, Mark Cuban told Bloomberg that he believes certain cryptocoins need more regulation.
Cuban is heavily invested in Bitcoin and Ethereum, but he dabbles in other coins as well. And a bad experience with one of them left him in favor of stricter rules for a specific kind of cryptocurrency investment known as stablecoins.
Cuban urged additional regulatory action after he lost a percentage of his cryptocurrency portfolio. This occurred when a token called IRON Titanium (TITAN) lost close to 100% of its value in a short period of time.
Here's what happened and why the billionaire investor and Dallas Mavericks owner believes action is needed.
Tips and tricks from the experts delivered straight to your inbox that could help you save thousands of dollars. Sign up now for free access to our Personal Finance Boot Camp.
By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.
Stablecoins are a subgroup of cryptocurrency investments. They are meant to be more stable than many other cryptocurrencies because they are pegged to widely used fiat currency, such as the U.S. dollar, or because they are pegged to commodities such as gold.
They're also a critical component of the decentralized finance (DeFi) space, which is meant to serve as a foundation for an open financial system that gives the power to people rather than central banks or large financial institutions.
Cuban has praised DeFi, and he invested in a specific stablecoin called TITAN, which was part of the Iron Finance Investment project. Iron Finance describes itself as a "multi-chain partial-collateralized DeFi and algorithmic stablecoin ecosystem"
Unfortunately, TITAN collapsed and quickly lost nearly all of its value. Initially, the collapse appeared to be the result of an exit scam called a "rug pull," that occurs when DeFi developers steal user funds. However, Iron Finance later explained that a "bank run" on its protocol caused the collapse.
Whatever the reason, Cuban lost most of the money he had invested in TITAN when the price of the stablecoin fell from $65 to $0.00000003. Although he didn't disclose the exact amount, he indicated in a statement to Bloomberg that it was enough that he "wasn't happy about it."
While the billionaire investor indicated that there are "risks I take on with the goal of not just trying to make money but also to learn," he still believes that the takeaway lesson from the experience was that more crypto regulation is needed when it comes to stablecoins.
"There should be regulation to define what a stablecoin is and what collateralization is acceptable," Cuban said. Cuban believes this is essential because lots of new players will aim to establish stablecoins over time. To protect investors, he believes the "math of the risks" should be "clearly defined for all users and approved before release."
Unfortunately, lawmakers are still struggling to determine what types of regulations to impose within the broader cryptocurrency industry, and the technology is developing so rapidly it's difficult for politicians without a deep understanding of the space to keep up.
This general lack of consumer protection laws and regulatory oversight is a key reason why investors who are putting their money into any cryptocurrency -- whether it's stablecoins or other investments -- need to make sure they're aware of the added risk that comes with volatile, untested, and largely unregulated investment products.
There are hundreds of platforms around the world that are waiting to give you access to thousands of cryptocurrencies. And to find the one that's right for you, you'll need to decide what features that matter most to you.
To help you get started, our independent experts have sifted through the options to bring you some of our best cryptocurrency exchanges for 2021. Check out the list here and get started on your crypto journey, today.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2021 The Ascent. All rights reserved.