How to question an algorithmic stablecoin's stability claim

Describe the promise in plain language

Practical checklist · not an audit of another provider

Identify the target price, what can be redeemed, by whom and under which conditions. Separate the token's market price from a contractual redemption right. If the explanation depends on another token, identify that dependency rather than treating the word algorithmic as a complete answer. Do not infer that a past recovery proves the system will recover again.

Look beyond the price chart

Practical checklist · not an audit of another provider

Ask whether the documented recovery involved external purchases, reserves, restricted redemptions or emergency decisions. The Terraform sentencing record provides a concrete example of undisclosed outside support. Record what the source establishes and what remains unknown. A missing explanation is a gap in evidence; it is not by itself a finding of fraud about the product you are researching.

Check control and authorisation separately

Practical checklist · not an audit of another provider

List who can change parameters, spend reserves or pause an operation. Then identify the legal entity and the official regulator relevant to the service offered in your country. ESMA's consumer warning is a starting point for European authorisation checks. Keep the technical and regulatory questions separate so that a positive answer to one is not mistaken for a guarantee about the other.

Write a failure-condition table

Practical checklist · not an audit of another provider

Use one row each for redemption, collateral, external counterparties and emergency control. For every row record the promised behaviour, the document supporting it and a condition under which it can stop working. Examples of questions include whether redemption is available to ordinary holders, whether another token must retain value and who can pause a mechanism. These are questions to investigate, not predictions about a particular token. Keep a past price recovery in a separate 'observed outcome' column so it cannot silently become proof of every design claim.

EU authorisation check after July 2026

Practical checklist · not an audit of another provider

Keep the stablecoin design review separate from the service-provider check. The EU-wide MiCA transitional period ended on 1 July 2026. Verify any provider offering relevant services through official registers rather than accepting an old registration or pending application as current authorisation. This does not validate the peg mechanism.

Sources, dates and limits

This account is based on the 11 December 2025 sentencing announcement. It does not provide a current token valuation, an assessment of successor projects or the latest appeal position. The described May 2021 intervention and later collapse are distinct events.