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TRON founder talks crypto downturn, stablecoin reserves, and competition

TRON Founder Justin Sun joins Yahoo Finance Live to discuss financially distressed crypto companies, recent bankruptcies, the future of stablecoins, crypto buyouts, and the outlook for the crypto market.

Video transcript

- Well, switching gears here and checking in on the world of crypto. As more and more firms file for bankruptcy, our next guest says he's ready to help those financially distressed crypto companies get back into the fray. And joining us now, we've got Justin Sun, TRON founder and ambassador of Granada to the World Trade Organization, as well as Yahoo Finance's David Hollerith joining in on the chat.

Justin, thanks so much for taking the time here with us today. First and foremost, when we think about helping out and what that looks like for some of the other distressed crypto platforms and operations, what does that look like from your perspective?

JUSTIN SUN: First of all, I think recent crypto downturn really destroyed lots of the balance sheet of crypto enterprise. I think while the biggest reason is because all the platforms use a very big leverage in their daily operation. So that's why when Bitcoin, Ethereum goes down, for example, 20, 30%, for those companies has used a very large leverage, it probably means even 50, even 70% down.

So a lot of the assets got liquidated. That's why we have seen even big companies with $10 billion in their balance sheet even get liquidated in a very short period of time, probably like around two to three weeks, just like what happened in the financial crisis.

DAVID HOLLERITH: Justin, I had to-- I want to go back to May, when TRON issued its algorithmic stablecoin, USDD. Now this is around the same time that Terra's algorithmic stablecoin famously collapsed, and this is one of the major events that sort of sparked the downtrend and the de-leveraging we've seen across the crypto market.

So I was curious. Could you sort of explain what's going on with USDD? It has about a $700 million market cap at this point, and it looks like it had de-pegged and has gone back to that crucial $1 mark as of now. But what's sort of going to define whether this-- the value arc of this stablecoin is going to be any different than Terra?

JUSTIN SUN: Yes, sure. USDD use a different mode compared to USD, Luna. I will say USDD is a hybrid mode. So first of all, we have over-collateralize stablecoin reserves. So basically right now, the reserve ratio is more than 300%. I will say even more than 110% it will be safe for USDD holders.

In the reserve currently, we have TRX, BTC, USDT, USDC. So basically, it's hybrids, Bitcoin, other cryptocurrencies like TRX, and also USDC and the USDT as a stablecoin. So TRON now will reserve-- will gradually change those ratio depend on the market situation.

Of course, I think back in May, the market seems to be super panicked so that's why, even for USDD, we see it's over collateralized. That's why we also have, I think, maximum has around 5% to 7% deep in the market crisis. But in a very short period of time, the pack go back.

I think because of the market back to normal. I think that's the first thing. And the second thing, USDD has a very active custodian TRON reserve, which we use different monetary policies to maintain the USDD pack. So basically when market is in the down term, we will buy USDD and buy crypto from the markets.

And the one market back to normal, we will issue more USDD and also sell some of the crypto reserve in our TRON reserve to [INAUDIBLE] to prepare for any market volatility. And also I think the most important thing for TRON reserve is guaranteed the decentralization of USDD.

One of the most important difference between USDD to USDC, USDT, all the regulatory stablecoin, is USDD don't rely on any banking rail. So basically we don't collect any users information, so you get maximum user privacy. At the same time, you can enjoy a decentralized blockchain infrastructure.

That's why we have a completely decentralized but also safe mechanism to guarantee the stable-- of the stablecoin itself. Different from Luna, Luna only have one mechanism to basically protect the stable of UST. Basically it's Luna as a token itself.

But it's very easy to fall into this death spiral, if the market feel super panic. In May, of course, I think the Luna and the US price going down the same time. So we will see UST will never go back to $1. And the same time, it's minting unlimited amount of the Luna token, which crashed Luna to 0 as we see what happened in the markets.

But USDD is very strong because we back by all the different collateral, including all different kinds of stablecoin in the TRON reserve, and we grow in a very healthy and organic way. I think which you can also see our balance sheet, we have a very strong reserve.

And also at the same time, TRON network has a very robust use case, which we process over $10 billion US dollar worth of stablecoin every day, and the USDD is only a very small percentage of that.

- Justin, I'd love to get your take on this. We had FTX founder Sam Bankman-Fried on yesterday. Take a listen to what he told us about what he's been up to. I'd love to get your reaction on the back side.

SAM BANKMAN-FRIED: A lot of these feel-- a lot of these failed. We reached out to everyone we put in the industry and said, hey, do you want to come in this with us? Do you want to do it yourself? Like we'd love someone else to take this on. And we don't want to be the only ones doing this.

We want this to be a broader industry effort. In the end, the response we got from sort of other investors was basically, wait a minute. Some of these companies look like they might have some financial troubles. Or so like, yes, that's correct. That's why they need help right now, like I don't know what you're expecting.

- Justin, so what do you feel-- what are your feelings or thoughts on one company starting to gain really a massive stronghold in the crypto industry? Is that a good thing or bad thing?

JUSTIN SUN: First of all, I fully respect and also fully respect Sam's offering help to all of our industry and entrepreneur to build blockchain industry. But I also feel like we need healthy competition. I think currently there is a loss of player in the crypto space, trying to become a very helpful role for everybody in the space.

I think we should collaborate together to bring crypto back to normal in these difficult times.

- TRON founder and ambassador of Grenada to the WTO, Justin Sun. Good to see you, and good to see you as well, Yahoo Finance's David Hollerith.