Ovunc Kutlu
12 May 2022•Update: 12 May 2022
ANKARA
US Treasury Secretary Janet Yellen on Thursday urged lawmakers about oversight over stable coins after the price of TerraUSD tanked to the bottom.
"With respect to digital assets, new products and technologies may present opportunities to promote innovation and increase efficiencies," she said during her testimony before the Committee on Financial Services in the US House of Representatives.
"However, digital assets may pose risks to the financial system, and increased and coordinated regulatory attention is necessary," she added.
A stable coin called TerraUSD, or UST, which was designed to be pegged to $1, plummeted to $0.3644 on Thursday for more than a 40% loss in a single day.
While other popular stable coins use reserve cash and assets to manage a 1-on-1 ratio against the US dollar to avoid volatility, UST uses an algorithm of burning and minting its sibling token Luna to adjust its own supply for price stability.
After being in freefall during the past week, the price of Luna on Thursday dove 99% to $0.01041 from $1.5. It stood at almost $100 a month ago.
Yellen reminded that President Joe Biden on Monday signed an executive order calling for a comprehensive approach to digital asset policy, and said the administration is drafting a report to identify financial stability risks and regulatory gaps in digital assets.
"I look forward to working with you on the issues and opportunities posed by digital assets," Yellen told the lawmakers.
"We are also eager to work with you to ensure that payment stable coins and their arrangements are subject to a federal prudential framework on a consistent and comprehensive basis," she added.
