Cryptocurrency News, Cryptocurrency Regulation, Terra (LUNA)

UST Fall Shows How Risky It Is to Financial Stability

TERRA’s Fall

Janet Yellen drew notice to the recent fall of Terra’s stable coin in a congressional hearing convened by the Banking, Housing, and Urban Affairs Committee set up by the senate.

She mentioned that a stable coin commonly called Terra (UST) suffered a run causing its value to decrease. Yellen further stated that she believes this only demonstrates that it is a fast-growing commodity that poses threats to financial stability, necessitating a suitable legal body.

Pat Toomey, a Senator, also pointed out that UST is a stable coin based on an algorithm, which means the coin is not supported by cash or other financial assets.

A Suggested Solution

According to a report released in November, stablecoins should be subject to more stringent regulation. The report mentioned that runs could grow and affect other entities within the sector, furthermore, this could put the entire financial system in jeopardy.

Yellen thinks a law should be passed by congress to control the creators and senders of stable coins. She showed a sense of urgency as she wished for the law to be passed as early as possible, hopefully before the end of the year.

Yellen, a powerhouse Economist also noted that the remaining stocks belonging to stable coins are increasing at a very alarming rate, thus necessitating a federal system that will be able to handle its growth.

Yellen has constantly shown her doubts and fears about stable coins, as last month she claimed that nobody can boldly and confidently say that their tokens will be easily redeemable for dollars.

As Tether issues continue to draw attention and create problems due to its lack of transparency, its competition, UST, is in no better shape as it seems to be suffering on Monday, this occurred after it lost its peg.

LUNA, which is Terra’s largest stable coin, suffered severely as it fell below $0.70, it was there for a while before it received a massive boost of liquidity which sent it back up, but just below the $0.90 mark. The UST coin fell to $0.68, recording its lowest point before it slowly got up to $0.80.

The coin briefly lost its peg last Sunday, one would think the increase was a sign of better things to come, but the recovery cheers were cut shut, as the coin lost its peg completely. With the recent happenings, there is still no sign of stability as the coin still shows how volatile it can be.

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