- The recent instance of the Terra meltdown was a sudden and shocking one for the crypto investors as folks had to go through major losses.
- Some investors cited these instances as a Bear Stearns moment for cryptocurrencies.
- According to senators and regulators, US regulation can help with crypto success and investors should not freak out.
Following the shocking instance of Terr aUSD (UST) sudden collapse, around half a trillion dollars faded away from the sector’s market cap. Additionally, a lot of major digital assets like Ethereum (ETH), Solana (SOL), etc are down by a considerable percentage.
Some investors, have called these instances a Bear Stearns moment for cryptocurrencies.
According to the acting Comptroller of the Currency for the U.S. Treasury Department, Michael Hsu, It really disclosed some deeper vulnerabilities in the system. And that we witnessed contagion, not only from terra to the vast crypto ecosystem, but to tether, to other stablecoins, and he thinks that’s something that wasn’t assumed.
But as yet it seems like the government officials are not concerned regarding a crypto crash causing a collapse of the whole broad economy.
Various regulators and senators highlighted to CNBC on the sidelines of the DC Blockchain Summit recently that the spillover effects are contained, crypto investors should not freak out.
And that U.S. regulation is the key to success for digital assets, and essentially, the crypto asset class is not going anywhere.
Senator Cynthia Lummis, who is quite a crypto-supportive person, signified that there are types of stablecoins. The one that collapsed is an algorithmic stablecoin, very distinct from an asset-backed stablecoin. And that she hopes consumers can see that not all stablecoins are created equal and that choosing an asset-backed stablecoin is important.
Seems like, some authorities have a strong belief over regulations.
Earlier the President’s Working Group on Financial Markets published a report signifying a regulatory framework for stablecoins. The report looks to draw out best practices to regulate stablecoins to be more broadly utilized as a means of payment.
Hsu highlights that for those who are like him, bank regulators, they are kind-of historians of money-like instruments. This is a familiar story, and the way to deal is prudential regulations. This is why he thinks some of the options, the proposals for more of a bank kind of regulatory-type approach are a good initiating point.
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