On Monday, the price of Terra’s UST stablecoin collapsed. TerraUSD (UST) is unable to maintain its peg to the US dollar. dTerra’s currency reserves simply weren’t enough to keep the value equal to the dollar. Janet Yellen, the US Treasury Secretary, immediately took advantage of the situation.

stablecoin regulations now more important than ever

The American Financial Stability Oversight Council (FSOC) kept a press conference where in addition to Jerome Powell (Federal Reserve) and Gary Gensler (SEC), Yellen also spoke. They seized the opportunity to challenge stablecoins. Stablecoins must fast be regulated, Yellen said. She sees lack of regulation on stablecoins as a threat to the ffinancial system

dThe minister thinks it would be “very appropriate” to begin regulating stablecoins by the end of this year. She wants a regulatory framework for stablecoins due to the massive UST crash. The press conference also talks about how stablecoins could be regulated in the same way as money market funds and bank deposits. These are subject to collateral and liquidity requirements. Furthermore, there are limits on the withdrawing and depositing money in money market funds and bank accounts. This can prevent the massive shifting of currencies from putting too much pressure on the financial system. Such measures are currently absent in the US regarding stablecoins.

NBesides Yellen there are also politicians like Senator Pat Toomey, who is usually very positive about cryptocurrencies and stands up for the small investor.

ffinancial fiasco with TerraUSD (UST)

The press conference came right after the TerraUSD (UST) stablecoin went down hard. Today, the token has fallen even further against the regular dollar. At the time of writing, the price drops to just under 30 cents.

Unlike, for example, the USDC stablecoin, which uses dollar reserves at US banks, UST relies on algorithms that monitor stability. The organization behind the stablecoin put bitcoin (BTC) on its balance sheet as collateral earlier this month. This has now fallen so much in value that the value of UST could no longer be guaranteed.

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