US Treasury Secretary Janet Yellen has called for legislation to regulate stablecoins before the end of 2022. She has mentioned the incident with the algorithmic stablecoin TerraUSD (UST), which lost its peg to the dollar, at the Senate Banking Committee hearing.
She has noted that UST survived the bank run and fell in price. She has added:
“I think this illustrates that this rapidly evolving product carries risks to financial stability, so we need an appropriate regulatory framework.”
Pat Toomey, a cryptocurrency-friendly, has stressed that UST is an algorithmic stablecoin. He has explained:
“This means that, by definition, it is not backed by cash or securities like more traditional stablecoins. I think that’s an important distinction.”