The Terra (LUNA) collapse should be seen as a wake-up call for regulators around the world, says Ken Griffin the CEO of Citadel Capital. He described Terra as a “catastrophe”. UST, Terra (LUNA)’s stablecoin had lost its peg. This sent panic across the stablecoin market as Terra lost 99% of its value.
Griffin says the incident should motivate the authorities to bring necessary and crucial regulatory frameworks for cryptocurrencies. He highlighted that regulatory bodies should prioritize stablecoins regulation. Griffin said the government should actually focus on a thoughtful resolution and stablecoins in particular. Stablecoins, by their name, should be appropriately regulated.
The Citadel Capital executive believes that stablecoin issuers should be compelled by law to disclose the reserves underpinning the fiat-pegged crypto assets on a regular basis. It should be done in a similar way as ETFs are required to disclose their underlying assets regularly. There should be periodic disclosures of what supports or backs the stablecoins. This is for the protection of investors – people will know whether their money is safe or not.
Griffin says documentation of reserves backing stablecoins should be available and verifiable. It should be noted that Tether, the largest stablecoin by market cap and volume, has never explicitly disclosed its reserves. As such, it has been at the receiving end of regulators. Griffin argued that if a person claims to have a stablecoin with a solid model and a dollar value, they should be able to back it up with custody accounts. This will ensure transparency and stability.