Regulators are growing anxious about stablecoins after Terra’s stunning collapse
Categories: Bitcoin US
Regulators are getting increasingly worried about stablecoins after the collapse of controversial cryptocurrency venture Terra.TerraUSD, an “algorithmic” stablecoin that’s meant to be pegged one-to-one with the U.S. dollar, has erased much of its value this week after a stunning run on the bank that saw billions of dollars suddenly evaporate from its market value.Also known as UST, the cryptocurrency operated using a complex mechanism of code combined with a floating token called luna to balance supply and demand and stabilize prices, as well as a multibillion-dollar pile of bitcoin. Tether, the world’s biggest stablecoin, also slipped below its intended $1 for several hours on Thursday, fueling fears of a possible contagion from the fallout of UST de-pegging. Unlike UST, tether is supposed to be backed by sufficient assets held in a reserve.U.S. Treasury Secretary Janet Yellen directly addressed the issue of both UST and tether “breaking the buck” this week. In a congressional hearing, Yellen said such assets don’t currently pose a systemic risk to financial stability — but suggested they eventually could. Britain is planning to bring stablecoins within the scope of electronic payments regulation, which could see issuers such as Tether and Circle become subject to supervision by the country’s markets watchdog.Separate proposals in the European Union would also bring stablecoins under strict regulatory oversight.