Yellen reiterated her long-standing call for the regulation of stablecoin and alluded to the case of UST, Terra’s stable currency currency is a medium of exchange that defines value. that lost its parity with the U.S. dollar this week.
U.S. Treasury Department Secretary Janet Yellen again stressed the need for strict regulation over major stablecoins in the cryptocurrency cryptocurrencies are digital currencies that use cryptographic technologies to secure their operation. market, asserting that despite the associated benefits they also bring risks to the financial system.
Yellen reiterates need to regulate stablecoins
This was reiterated by Yellen during a hearing held today, where government official made reference to the stablecoin native to the ecosystem of Earth, FSO , which hasenfrentado dificultades para mantener la paridad con el dólar estadounidense in recent days. The asset, which is expected to maintain a stable level of USD $1, even reached lows near USD $0.65 amid a widespread drop seen on Tuesday in the major cryptocurrency markets.
“ A stablecoin a cryptocurrency with extremely low volatility, sometimes used as a means of portfolio diversification. Examples include gold-backed cryptocurrency or fiat-pegged cryptocurrency. known as TerraUSD experienced a crash and saw a drop in value. I think this simply illustrates that this is a fast-growing product, and there are inherent risks.” Yellen commented on the matter during a hearing on Tuesday, adding:
New products and technologies can present opportunities to promote innovation and increase efficiency. However, digital digital technologies are these electronic tools that have the ability to generate, store or even process data. assets can also present risks to the financial system, and greater regulatory and coordinated attention is needed.
The official closed her remarks by reiterating the importance and urgency for Congress to pass legislation specifically targeting stablecoins, which is expected to be submitted to the body by the end of this year.
The comments come shortly after U.S. President Joe Biden’s administration said it will make it a priority to assess such assets and the associated liabilities of issuing institutions, which are expected to face the same regulatory regime that applies to domestic banks.
The case of UST
While stablecoins have been in the crosshairs of many U.S. officials because of the risks they pose as a substitute for the U.S. dollar, the case of UST recently issued by Earth further sets off alarm bells for those who are critical of this type of technology.
As many of you probably already know, the stablecoin issued by the team at Earth in recent times operates under an algorithmic model, which allows it to keep parity with the U.S. dollar after relying on the token a digital unit designed with utility in mind, providing access and use of a larger crypto economic system. LUNA a modo de reserva, sumado a mecanismos de acuñación y quema en la red para mantener dicho balance.
Recently, the creator of the Earth, Do Kwon, anunció la implementación de una estrategia que permitirá a la stablecoin estar respaldada en reservas de Bitcoin the biggest and most popular cryptocurrency in the world. It is a decentralized digital currency that enables users to make trustless peer-to-peer transactions. and other cryptocurrencies, which is whyLuna Foundation Guard (LFG) has been making fairly aggressive fund purchases. BTC in recent weeks.
However, the downturn that mainly affected Bitcoin and spread a price difference between asking and selling prices of the asset. to the vast majority of the most reputable currencies made its weight felt on the market an area or arena, online or offline, in which commercial dealings are conducted. in general, generating an effect that was considered unthinkable for a stablecoin. As a result, the token UST also suffered and reached lows near USD $0.65 at the peak of trading, a condition that puts at risk any currency whose premise is to maintain a 1=1 parity with the US Dollar.
Tether (USDT), the other controversial case
On the other side we haveTether (USDT), stablecoin issued by the company of the same name, which in turn is associated with the exchange businesses that allow customers to trade cryptocurrencies for fiat money or other cryptocurrencies. ecosystem. Bitfinex, which is particularly controversial because of the history of irregularities and arbitrary management by its main administrators.
The controversy with this stablecoin dates back to the end of 2017, when some studies highlighted that the high issuance of this currency coincided with the bullish streak that Bitcoin experienced by that time, something that led analysts and enthusiasts to suspect that there was no equity equity is the funds that would be returned to a company's shareholders if all of the company's assets were dissolved and all debts were paid off in the event of liquidation. between the amount of dollars stored in bank accounts and the USDT circulating in the market.
This is compounded by the opacity with whichTether has managed the information associated with its reserves, and although in more current times it issues reports on external audits conducted periodically, for many the stablecoin is a kind of “time bomb” because of the legal problems faced by the company responsible mainly in the U.S., where the courts have even opened legal disputes to clarify the inaccuracies in which the cryptocurrency is immersed.
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