According to US Treasury Secretary Janet Yellen, the stablecoin industry is not yet large enough to pose a direct threat to the country’s financial stability. Yellen reported this to the Financial Services Committee in the House of Representatives.

Janet Yellen on stablecoins

While the chaos in the crypto market was of course huge after the UST stablecoin and Terra (LUNA) went down completely, it is too early to say that the decoupling of stablecoins against the dollar will endanger the stability of the financial system, Yellen said. However, it is extremely important that stablecoins are regulated as soon as possible to avoid drama in the future.

“We’ve had an illustration of the risks associated with stablecoins with Terra and with Tether over the past week…there could be runs,”

The Minister cited an investigation carried out by the US government some time ago. This study sought to find out what could happen to the economic system if major stablecoins suddenly collapse. While these risks will certainly be there in the future, the stablecoin market currently remains too small to lead directly to dangerous situations.

Regulation is desperately needed

The fact that stablecoins Extremely fast growth is of course a cause for concern for regulators in the United States. Nevertheless, Yellen pointed out that the dangers associated with stablecoins are actually the same as bank run risks known to economists for centuries.

That is why it is important that the stablecoin sector is neatly and clearly regulated, according to Yellen. The risks are still very small at the moment, but this could change in the future. At that point, a regulatory framework for stablecoins should exist. Senator Pat Toomey therefore called on Congress to act quickly.

“If Congress does not act in this area, there is a danger that a fiat-backed stablecoin will lose its dollar peg at some point,” Toomey told reporters on Wednesday. “And that could not only be very problematic for consumers who lose money, but it could also have repercussions.”

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