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Tether(USDT), a popular stablecoin pegged to the US Dollar, might not be a safe place for crypto investors to invest their capital, believes a major US banking regulatory agency.
The collapse of Terra(LUNA) earlier this month has created shock waves in the crypto market. Terra(LUNA), now referred to as Terra Classic, led to roughly $60 billion in wealth loss.
Around the same time, USDT too lost its peg by a small portion before recovering amid the heavy sell pressure.
Michael Hsu, the head of the Office of the Currency(OCC), in an interview, said that Terra(LUNA) collapse and its algorithmic stablecoin UST had brought several deep-rooted vulnerabilities in the crypto sector.
Hsu said that Tether is not an algorithmic stablecoin like Terra USD. Tether is backed by actual assets. But, the question arises of what led to some contagion.
Hsu further says that it is a familiar story for the individuals like him who are bank regulators or historians of money-like instruments. And prudential regulation is the way to deal with him. Therefore, he says he believes that a good point for the conversation is the proposals for more of a bank [or] regulatory type of approach.
Hsu advises investors not to take the fact that Tether, too, was affected lightly in the same period as UST’s collapse.
He points out that there is a clear contagion, not only to the wider crypto ecosystem but to other stablecoins such as Tether from Terra. It was something that wasn’t assumed, and that’s something people really need to pay attention to.
Though regulations are required to create more transparency in the environment, the regulatory atmosphere shouldn’t push innovative firms in the sector out of the country, according to Senator Cory Booker (D-NJ).
Booker says that they do not wish to strangle a budding industry and kill innovation, hence losing out on opportunities. Further, the senator explains that a lot of these opportunities are going offshore, and we’re missing out on the job creation and economic growth part of it. Therefore, it’s quite a significant space if the regulations are created properly. They can even prove helpful to the industry and protect consumers.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
