An Anchor developer claims to have warned Kwon that 20% interest rates are unsustainable

A core developer said in an interview with the Korean media JTBC: "The Anchor agreement originally provided a 3.6% interest rate, but in order to attract more investors, the interest rate was raised to 20% a week before the release."

"I didn't know there would be such a high interest rate. It was suddenly set to 20% a week before the launch," said the developer, who goes by the pseudonym Mr.B.

"From the beginning I thought it was going to collapse. (It was designed by me), but I didn't expect it to completely collapse."

Mr. B said the platform was designed to offer only a 3.6% interest rate, which is a key component in keeping the Terra ecosystem stable as it takes into account the funds available in Anchor’s earmark.

However, Mr. B revealed that a week before the release, the developers discovered that the plan had changed, allowing investors to lock their UST stablecoins in the Anchor protocol and earn a very high 20% interest.

JTBC also claimed that it had obtained an internal design document provided by Terraform Labs, which wrote about using high interest rates to attract investors.

The developer stated that he tried to raise this issue with Terra Luna founder Kwon Do-Hyung (Do Kwon) before Terra Luna's release in April 2019.

"Before the release, I suggested to Kwon Do-Hyung to lower the interest rate, but it was not accepted."

Due to the dramatic collapse of Terra (LUNA) and the algorithmic stablecoin UST, the South Korean government plans to establish a new Digital Asset Committee in June to serve as the regulator of the South Korean cryptocurrency industry to be responsible for policy formulation and supervision.

Do Kwon has been summoned to a congressional hearing in South Korea in mid-May.

Court documents show that just days before LUNA's debacle, he disbanded South Korea's Terraform Labs, which put him in a bind.

In May, South Korean authorities also reportedly issued subpoenas to Terraform Labs employees to investigate whether there was intentional price manipulation and whether the token went through the proper listing process.

Still, the Terra co-founder managed to launch a new chain called Terra 2.0 (Pheonix-1) on May 28, aimed at reviving the fading Terra (LUNA) and TerraUSD (UST).