UST Is Receiving Attention From Regulator
After the collapse of Luna, the collapse of UST has garnered much attention. It is plausible to compare UST’s collapse against that of Libra.
This incident has intrigued lawmakers and regulators around. The fall of terraUSD (UST) has posed the question: are esoteric products safe? For instance, crypto investors are curious whether assets like algorithmic stablecoins come with financial instability concerns.
Does all this matter?
The lawmakers and regulators may choose to keep a priority watch over UST. There are many reasons for this –
- When Libra stablecoin was launched, governments buckled up to make new rules. These regulations were placed to monitor and control the operations of stablecoins.
- But, these regulations focused on stablecoins backed by assets. They did not expand to the domain of algorithmic stablecoins.
- After the massive collapse of UST (an asset-backed stablecoin), governments are now alert.
How the events unfolded
It all started in 2019 when Facebook announced the launch of Libra. Regulators were skeptical of this new cryptocurrency. As a result, they pushed back against Libra, worrying it may overturn the dollar-based financial system.
Though the project eventually shut down, it woke up the regulators. Lawmakers realized they need to control and regulate stablecoins.
According to Janet Yellen, US Treasury Secretary, the problem with algorithmic stablecoins is that they are not backed up. This is concerning, especially when financial stability is a big problem with digital assets.
Regulation on stablecoins is important. Right now, they are mostly used within the crypto market. But in the future, stablecoins may be used for consumer products.
