THELOGICALINDIAN - The Treasury Secretary has afresh fatigued the charge for a stablecoin authoritative framework
U.S. Treasury Secretary Janet Yellen has alleged on Congress to canyon stablecoin legislation, referencing UST’s contempo depeg event.
Yellen Highlights Stablecoin Risks
Stablecoins are adverse added analysis from the U.S. Treasury.
In a May 10 hearing, Treasury Secretary Janet Yellen has already afresh fatigued the charge for a stablecoin authoritative framework. Speaking in acknowledgment to pro-crypto Senator Pat Toomey, Yellen said that the accepted authoritative frameworks “don’t accommodate constant and absolute standards for the risks of stablecoins.” She added that she would acceptable bipartisan activity to authorize a framework, abacus that the Treasury would assignment with Congress on introducing regulations.
She drew specific advertence to the contempo depeg of the algebraic stablecoin TerraUSD, advertence that the case highlights the “risks to banking stability” stablecoins can affectation and that the U.S. needs to authorize an adapted framework to adapt the market. “I do anticipate it’s important to agenda that the stablecoin to which you refer, I believe, is an algebraic stablecoin, and so that agency by analogue it’s not backed by banknote or balance as the, if you can alarm them, added accepted stablecoins,” responded Toomey, afore allurement if she anticipation adjustment would be acceptable afore 2022 is out. Yellen said that she thinks establishing a framework afore the end of the year would be “highly appropriate.”
TerraUSD, added frequently referred to as “UST,” is an algebraic stablecoin developed by Terraform Labs. Instead of captivation dollar affluence to ensure its peg, UST relies on bazaar armament to behest its price. It works in bike with Terra’s airy token, LUNA. Users can bake $1 account of LUNA to excellent 1 UST, and carnality versa, which apparently ensures its amount advance the dollar. However, UST’s dollar peg has accurate itself to be vulnerable during periods of aerial bazaar volatility, such as yesterday’s bazaar drawdown that saw Bitcoin briefly dip beneath $30,000. UST traded as low as $0.62 on Binance and has somewhat recovered, but it’s still about 10 cents abbreviate of its peg at columnist time.
Today is not the aboriginal time Yellen has referenced UST while calling for stablecoin regulation. During a speech at the American University in Washington, D.C. on Apr. 9, she mentioned that a stablecoin had absent its peg during the May 2021 crypto bazaar crash. Although she did not anon adduce UST, it was the alone stablecoin to bead beneath $1 during the correction.
More generally, Yellen has declared that her primary focus apropos crypto assets is to adapt stablecoins to assure consumers. She has frequently highlighted that no official legislation currently ensures that dollar-backed stablecoins such as USDT can be adapted aback into dollars. While algebraic stablecoins such as UST do not abatement beneath this purview, they about use the dollar as a assemblage of account, which is acceptable to allure the absorption of U.S. regulators in the future.
Disclosure: At the time of autograph this piece, the columnist endemic ETH, LUNA, and several added cryptocurrencies.
