US Treasury Secretary Janet Yellen said on Thursday that the stablecoin market has yet to reach a size that would pose a systemic risk to the US financial system. In addition, Fitch Ratings said that the collapse of altcoin project Terra (LUNA) will accelerate calls for regulation.
Jenet Yellen: Stablecoins need regulation
At a hearing before the House Financial Services Committee, Representative Jim Himes put pressure on Yellen about where systemic risk really starts made. Even though the cryptocurrency market cap is $2 trillion, Jim Himes said he doesn’t think the field has crossed the threshold. Janet Yellen agreed, but noted that the risk potential remains:
While I can’t say they’ve reached the scale of what is currently a financial stability concern, we do see Terra tipping the balance and Tether coming under some pressure. I wouldn’t call it a real threat to financial stability on this scale, but they’re growing very fast and present the kind of risks we’ve known for centuries in connection with bank runs.
Yellen declined to give Himes a figure that the market would pose a systemic risk, but said usage is growing rapidly and there are operating and payment system risks. He argued that the President’s Working Group’s concerns about run-ins on stablecoins are not unfounded given that Terra and Tether have ‘stumbled’ over the past few days, citing the need for comprehensive stablecoin regulation from Congress.
According to Yellen, a central bank digital currency could also alleviate some of these concerns, depending on its design. The Federal Reserve continues to examine the pros and cons of issuing a digital dollar.
Fitch: Collapse of altcoin project Terra will accelerate regulation
Fitch Ratings, one of the ‘Big Three’ credit rating agencies, said that the epic collapse of altcoin project Terra’ predicts it will ‘speed up calls for regulation’. In December, Fitch noted that algorithmic stablecoins face “untried and unique structural challenges.”
As reported by Cryptokoin.com , the price of LUNA, which had a market cap of over $42 billion last month, dropped below a cent today. The massive crash caused Binance to delist the cryptocurrency-margined LUNA perpetual contracts. Some other exchanges also pulled the plug.
