Legislators could hasten crypto regulation
Terra’s recent collapse could hasten cryptocurrency regulation by legislators, according to Jeremy Allaire.
Terra’s UST was the third-largest stablecoin in the market a few weeks ago, behind the USDT and USDC. However, UST is now unpegged from the US Dollar and has lost its position as one of the top stablecoins in the market.
Jeremy Allaire, the CEO of Circle, said Terra’s collapse could acclerate cryptocurrency regulation by legislators in various parts of the world. He mentioned this during a recent interview with Yahoo Finance. He said;
“When you have a major blowup, it’s certainly going to accelerate the need for Congress to act and establish some perimeters around who and what is involved in operating a dollar stablecoin in the United States of America.”
Anchor Protocol was the major decentralised finance (DeFi) project on the Terra blockchain. According to Allaire, the high-interest rates offered by Anchor to depositors should have been an early indicator that the Terra system wasn’t sustainable in the long run. He said;
“I think what has unfolded with these unstable stablecoins, such as UST, was entirely predictable. Our own analysis from a very long time ago suggested that the footing that this was on was really based on subsidizing these yields, which was really driving people to kind of buy this Luna token, create these UST tokens, put them in this 20% interest rate, which was too good to be true.”
Allaire’s comments come a few days after the United States Treasury Secretary Janet Yellen called for new crypto regulations following the Terra crisis. She said;
“I wouldn’t characterize [cryptocurrencies] at this scale as a real threat to financial stability, but they’re growing very rapidly, and they present the same kind of risks that we have known for centuries in connection with bank runs.”
LUNA, the native coin of the Terra ecosystem, has lost its place amongst the top 10 cryptocurrencies by market cap. It now occupies the 211th position in the cryptocurrency market. Allaire concluded that;
“I think standing between broad-based mainstream adoption of crypto infrastructure for commerce and financial applications at a global scale is this regulatory clarity. And I think we have the impetus to see that happen now.”