Janet Yellen has made some thoughtful remarks about the proper way to regulate digital currencies and assets, innovation, and their rules. The current gloomy environment surrounding the crypto market necessitates government regulation of the cryptocurrency industry.
In a recent interview, the Treasury Secretary, Janet Yellen, noted the financial services sector’s incredible growth from $14 billion to $3 trillion within five years and its origins, a clear indication that the industry should be regulated since it appears to be here for the long haul.
Yellen calls for responsible crypto innovation
Key government officials have used the fall of Terra LUNA as a weapon of argument to control and regulate the cryptocurrency market. In addition, the solutions provided by Terra’s CEO have left the crypto market in ruins. Governments and prominent figures in the cryptocurrency world have condemned this blunder.
The price of UST plummeted when the peg to the US dollar was broken, putting tremendous strain on Luna to keep its value up. This was due to how Terraform designed the two tokens to interact, resulting in a large supply spike for Luna and a severe price drop. The number of coins in Luna’s vault rose from 340 million to 6.5 trillion in a few days. At the same time, its price plummeted from $60 to less than a penny.
Binance CEO Changpeng Zhao has spoken out on the collapse of the stablecoin TerraUSD (UST) and its companion token Luna (LUNA), which he considers a “disappointment.” In addition, Zhao shed light on Binance‘s decision to halt trading for both tokens.
I am very disappointed with how this UST/LUNA incident was handled (or not handled) by the Terra team. We requested their team to restore the network, burn the extra minted LUNA, and recover the UST peg. So far, we have not gotten any positive response, or much response at all.
Terra’s fall has prompted the United States Treasury Secretary, Janet Yellen, to call for stablecoin regulations similar to those introduced for specific crypto sectors. The call for regulation has significantly influenced the entire crypto market.
In a recent speech, Chair Yellen stated that the government’s duty should be to guarantee responsible innovation—an innovation that is beneficial for all Americans. Yellen reminded lawmakers that they are responsible for safeguarding America’s national security interests and the environment while promoting economic competitiveness and growth in the United States.
The American Blockchain PAC praised Secretary Yellen’s practical framework for developing a legal and regulatory structure to protect consumers while also fostering innovation. However, Rep. Glen “GT” Thompson (R-Pa.) has made significant progress in this area by proposing a well-reasoned and well-defined crypto regulatory blueprint.
Terra collapse fuels a stablecoin legislation framework by Congress
Several lawmakers are following Secretary Yellen’s established procedure in the incoming bill drafts. According to the Congressional Research Service, 49 states got compelled to become money transmitters.
It would cost millions of dollars and years to achieve it. Making this a reality necessitates navigating through the complex administrative pathways followed by continual onerous compliance standards. Secretary Yellen’s recommendation of practicality is honored by allowing companies to pick “one-stop shopping.”
The bankruptcy of Terra’s dollar peg has spooked the crypto industry, and its fear has now spread to Congress. As Terra and Luna plunged, politicians got dragged into the cryptocurrency realm.
Following November, US lawmakers have pushed for the creation of a stablecoins regulatory framework. This week, Congress became suddenly confronted with the question of algorithmic stablecoins following TerraUSD’s demise. The fall of Terra has damaged the rest of the sector. Furthermore, n addition to shaking public confidence in stablecoins, it has damaged faith in them generally.
By the end of this Congress, Rep. Maxine Waters (D-CA), chair of the House Financial Services Committee, is supposed to have a set of crypto legislation ready for introduction. According to Congressman Stephen Lynch (D-MA), his ECash legislation will be included in the package. The bill package would focus on algorithmic stablecoins and their created issues for investors.
The STABLE Act, which was introduced at the end of the last Congress but did not include such a clause or have a chance to become law, has yet to address the current state of the crypto environment. Grey, one of the bill’s sponsors, objects to the PWG’s separation of algorithmic and non-algorithmic stablecoins.
Grey said he hopes that the Terra debacle will return algorithms to the forthcoming legislation. However, that proposal may face an uphill battle, even among Democrats, who may lose their majorities in midterm elections.
There has been a widespread reluctance among lawmakers to deal with algorithmic stablecoins in legislation, which is understandable. Republicans have been more open to the idea of algorithmic stablecoins being money market funds that fall under SEC regulation and investors can only purchase through registered broker-dealers.
Meanwhile, there are reports that the House Financial Services Committee has issued inquiries to plan a hearing on Terra. Reports have it that a public hearing on stablecoins will take place, and Terra will almost certainly make the discussion.