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Yellen Extends Stablecoin Regulatory Call After TerraUSD Crash


WASHINGTON — This week’s drop in the price of a major cryptocurrency pegged to the dollar prompted Treasury Secretary Janet Yellen on Tuesday to reiterate her call to Congress. to allow regulation of so-called stablecoins.

TerraUSD, the fourth-largest stablecoin and the 10th-largest cryptocurrency by market value according to CoinMarketCap, saw its price drop to as low as 69 cents on Monday following a series of large withdrawals over the weekend. Like other stablecoins, TerraUSD is intended as a haven of sorts Cryptocurrency investorswith its price designed to remain flat at $1.

“I think that simply illustrates that this is a rapidly evolving product and that there are risks to financial stability,” Yellen said at a hearing Tuesday before the Commission. Senate Bank, note Wall Street Journal Report on TerraUSD. “We really need a consistent federal framework.”

Last year, a regulatory panel led by the Treasury proposed that Congress write laws governing stablecoin issuers same with banks. Yellen said the current law does not provide comprehensive standards for new properties.

Pennsylvania Senator Pat Toomey, the committee’s top Republican, expressed interest in moving quickly. “Do you think we can work to achieve the goal of perfecting the law this year?” he asked during the hearing.

“I think that’s a great fit,” Ms. Yellen said, adding that she was looking forward to working with Mr. Toomey’s staff.

TerraUSD is structured differently from other major stablecoins, such as Tether, USD Coin, and Binance USD. The issuers of those tokens say they’re backed by cash or liquid assets that can be sold quickly to pay any investor who wants to cash out.

In contrast, TerraUSD is known as an algorithmically stable currency rely on financial engineering, instead of the hard asset, to maintain its exchange rate with the dollar. Critics of the model say that makes it riskier as traders may not always respond as expected with its built-in offers.

A spokesperson for the TerraUSD advocate did not immediately respond to a request for comment.

Do Kwon, the South Korean developer behind TerraUSD, said in a tweet Tuesday that he is “about to announce a recovery plan” for the stablecoin. “Just wait,” Mr. Kwon said.

Bitcoin’s volatility limited its adoption for payments, so entrepreneurs created stablecoins: cryptocurrencies pegged to assets like the US dollar. But the recent settlement of a probe into the most popular stablecoin, tether, shows the need for transparency in the burgeoning industry. Artwork: Sharon Shi / WSJ (Video from 30/3/21)

Write letter for Paul Kiernan at [email protected]

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Appeared on 11 May 2022, print edition as ‘Yellen Presses for Stablecoin Rules’.



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