The UST stablecoin’s dramatic decline in value featured in U.S. Treasury Secretary Janet Yellen’s testimony before the committee on banking, housing, and urban affairs, U.S. Senate, on Tuesday. Yellen stated that the stablecoin’s turbulence clearly illustrates risks associated with crypto assets to financial stability, adding that the treasury department would soon issue a comprehensive report that outlines hazards posed by the cryptocurrency industry. “Increased and coordinated regulatory attention is necessary,” she explained.
New Crypto framework in 2022
This gains prominence as the statement comes within hours after the UST stablecoin de-pegged with the U.S. Dollar amid a bloodbath in the cryptocurrency market.
She said there was a need for an appropriate framework as soon as this year. “With respect to digital assets, new products and technologies may present opportunities to promote innovation and increase efficiencies. However, digital assets may pose risks to the financial system, and increased and coordinated regulatory attention is necessary.”
Stablecoins Within Federal Framework
In line with President Biden’s executive order calling for a comprehensive approach to digital asset policy, the Financial Stability Oversight Council is drafting a report that will identify financial stability risks and regulatory gaps, the U.S. Treasury Secretary said in her testimony. She also expressed interest in working closely with the committee “to ensure that payment stablecoins and their arrangements are subject to a federal prudential framework on a consistent and comprehensive basis.”
UST’s price dropped to a low of $0.60 and de-pegging by a staggering 40% from the U.S. Dollar, in a potentially permanent dent to investors’ trust on its stability. Following this, crypto exchange Binance announced temporarily suspension of the withdrawal of LUNA and the UST stablecoin citing high volume of pending withdrawal transactions.
As of writing, UST is trading at $0.908038 as opposed to a 24 hour low of $0.6841.