During a congressional hearing hosted by the Senate Committee on Banking, Housing and Urban Affairs, US Treasury Secretary Janet Yellen pointed to the recent collapse of a stablecoin-focused altcoin project.
Janet Yellen says the collapse of the IHR demonstrates risks to financial stability
US Secretary of the Treasury Janet Yellen, at the congressional hearing held by the Senate Banking, Housing and Urban Affairs Committee:
A stablecoin known as Terra (UST) has risen and its value has plummeted… I think this shows that this is a fast growing product and there are risks to financial stability and we need an appropriate framework.
In response, Senator Pat Toomey (R-PA) stated that UST is an algorithmic stablecoin, meaning it is not backed by cash or securities.
In November, a regulatory agency led by the US Treasury Department released a report calling for tighter oversight of stablecoins. He warned that leaks could spread “contagiously” across the industry, exposing the wider financial system to a higher level of risk.
U.S. Treasury Secretary proposes regulation for stablecoin-focused altcoin projects
Additionally, Yellen thinks it would be “very appropriate” for the regulation to go into effect later in the year. She adds that the outstanding stock of stablecoins is growing so rapidly that there is a need for a “coherent federal framework.” Last month, Yellen voiced her skepticism about stablecoins, claiming that “no one” can assure users that their tokens can be easily exchanged for dollars. These statements have turned eyes back on Tether company…
While Tether (USDT) often sparks controversy due to lack of transparency, its decentralized rival UST tumbled to 0% early Monday after losing price stability. It fell below $70. Terra’s largest stablecoin saw below $0.70 without rebounding to $0.90 accompanied by a massive injection of liquidity. Still, there are no signs of stability as the LUNA is down 50%. We covered the UST price action in this article.
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