US Treasury Secretary Janet Yellen is calling for legislation regulating stablecoins to eliminate the risks she believes they pose to financial stability.
During her testimony before the US Senate Committee on Banking, Housing and Urban Affairs, Yellen said the government is already aware that stablecoins are currently operating in an inadequate regulatory and legal environment.
“The President’s Working Group has issued a report concluding that the current legal and regulatory framework does not provide consistent and comprehensive standards for the risks of stablecoins as a new breed of payments product, and urges Congress to legislate to enact to ensure that stablecoins and such arrangements have a federal recognition framework.
I call for bipartisan action to create such a framework. We would be delighted to work with you.”
Citing a newspaper report indicating that the algorithmic stablecoin TerraUSD (UST), which is designed to trade one-for-one against the US dollar, has lost its peg, Yellen says this is further evidence of the risks the fast-growing stablecoin sector poses to financial stability .
“I would like to note that just this morning a report appeared in The Wall Street Journal that a stable coin known as TerraUSD had run and had lost value.
I think that just goes to show that this is a fast growing product and there are risks to financial stability and we need a proper framework.”
TerraUSD is trading at $0.71 at the time of writing, having previously dropped to a low of $0.30.
Last month, the US Treasury Secretary expressed similar sentiment when she cited the collapse of a partially collateralized stablecoin, backed by Iron Finance DeFiplatform was issued.
Yellen called for a digital asset regulatory framework that supports “responsible innovation” while appropriately managing risk.
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Source: Crypto News Deutsch