The crash of the UST stablecoin that has evaporated around $500 billion in overall crypto market value over the past two weeks is catching the attention of Washington policymakers – they fast-track, desire to set federal rules for this free industry.
Financial watchdogs are focusing on stablecoins. Stablecoins are also known as stablecoins. This is a digital currency developed on Blockchain and has a stable value. The price of a Stablecoin is pegged to another stable asset such as gold or fiat money (USD, EUR, VND). Stablecoins are considered a promising solution that can replace traditional payment systems. Currently, the value of Cryptocurrencies, especially Bitcoin, fluctuates every day.
However, Stablecoins guarantee a stable and global price, independent of a central bank. It is also a subset of cryptocurrencies intended to provide traders with a safe haven from the wild swings of the broader crypto market, but expect a similar stablecoin. called TerraUSD – also known as UST exploded almost 2 weeks ago.
However, advocates of other popular stablecoins say their products stand on a more solid footing, as they hold enough cash or other liquid reserves to meet all needs. reward request.
But for now, regulators make no discernible difference. “There’s a lot of work to be done here, and in the meantime, the investing public is still not as well protected,” US Securities and Exchange Commission (SEC) Chairman Gary Gensler said in a statement. once appeared at the annual meeting of the Financial Industry Regulatory Authority (FINRA) on May 16. “We will continue to be a cop that keeps pace.”
Treasury Secretary Janet L. Yellen told lawmakers last week that the UST’s fate underscores their need to allow bank-like requirements for stablecoin issuers , along with what a regulatory panel led by the US Treasury Department recommended last fall.
But a senior Treasury Department official said regulators won’t necessarily have to wait for lawmakers to act. “In the absence of Congressional action,” the official said, speaking on condition of anonymity to provide a candid assessment, last week’s UST coin volatility “will put regulators and stakeholders on more concerned with their strengths if they feel the need to act alone to reduce risk.”
It remains unclear what brought the UST into its vortex. Cryptocurrency researchers have several theories as to how stablecoins, which attempt to use complex financial engineering to keep the price at $1, slipped off the dollar peg and then continued on. inflation. Later, a group founded by UST founder Do Kwon revealed that they had sold a total of 80,081 BTC, or 99.61% of their Bitcoin holdings, in a “final attempt to secure the UST peg.” . Totally spent $2.83 billion of sales proceeds from its reserve assets of all kinds. However, these rescue efforts were unsuccessful.
Cryptocurrency prices are falling. The future is bleak
Kwon said he won’t give up, suggesting a fresh start to try to revive the project. But the results are clear enough: UST and Luna holders are estimated to have lost a total of $42 billion in coins related to this Terra project, according to blockchain analytics firm Elliptic.
“Terra is throwing everything including value sinking in here, market volatility is reducing their value,” said Ed Moya, a crypto analyst at trading firm OANDA. Moya said the collapse of the virtual currency, and the broader crypto sell-off that the project proactively triggered, appear to have discouraged investors in digital assets.
A number of stablecoin regulatory proposals are circulating in the US Congress, but none follow the approach suggested by the team led by the US Treasury. Cryptocurrency industry leaders are turning their attention to a more comprehensive bill to establish a crypto regulatory framework that Sens. Cynthia M. Lummis (R-Wyo.) and Kirsten Gillibrand (DN.Y.) are expected soon.
Proposal may remove coins like UST
Lummis said the proposal could eliminate coins like UST, known as algorithmic stablecoins for a trading mechanism designed to keep their price at one dollar. “We continue to evaluate that and other issues after our draft is passed, because our draft considers safety provisions for consumers, even for retailers. release,” Lummis said. “We continue to evaluate that and other issues.”
Meanwhile, regulators are checking with crypto experts as they plan their response, including industry leaders and advocates of tighter regulation. “I know ahead of time that policymakers at the White House, Treasury, and Fed are working hard to develop a policy framework for stablecoins,” said Dan Awrey, a Cornell Law School professor who focuses on financial regulation. and advised the US Treasury team last fall. As can be seen, the sharp drop in cryptocurrencies tests the durability of a heavily driven industry.
Policymakers face two challenges, Awrey said. “The first involves charting, assessing, and addressing the myriad legal, technological and institutional issues required to design an effective framework – one that balances the goals about efficiency, competition and stability,” he wrote in an email. “The second, more difficult but more important challenge, involves answering a broader set of – and unanswered – questions about the role stablecoins should play, if any, and the impact of this for money and future payment systems”.
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