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After LUNA dump: stablecoin Tether (USDT) falls to USD 0.95

 


After the stablecoin UST could no longer guarantee the coverage of the reserves, other stablecoins are now also beginning to fluctuate in value.


In the early hours of May 12, 2022, the USDT rate fell to 0.95 cents. After LUNA and UST dump, authorities want more regulation of stablecoins. Tether could be affected.

The CTO of Tether and Bitfinex guaranteed that users will always hold exactly $1 for their USDT. According to the company, it owns around 80% of its cash reserves, while the rest consists of various assets.


Despite this, the stablecoin Tether lost its peg to the US dollar throughout the day. Competing stablecoins Circle’s USDC and Binance’s BUSD gained in value at the same time. USDT's market cap is also down around 5% on the day and currently stands at around $79 billion.


Tether has been repeatedly criticized in the past for covering the reserves and has already been involved in several court cases. Lack of confidence in Tether and panic after the recent crash of LUNA and stablecoin Terra could lead to further selling of USDT and actually put Tether to the test. The current regulatory news could also have a negative impact on sentiment regarding the stablecoin.


Authorities want to regulate stablecoins: is the Tether ban coming?

In the US, calls for stablecoin regulation are growing louder. US Treasury Secretary Yanett Yellen is calling for comprehensive stablecoin regulation and would like to see legislation passed by the end of 2022. In addition, the US Treasury Department is already working on a comprehensive report. For them, the current LUNA drop shows the dangers of stablecoins:


“A stablecoin known as TerraUSD experienced a run and lost value. I think that just goes to show that this is a fast growing product and there are fast growing risks."


According to a CoinDesk news article , stablecoin regulation could also come in the EU. According to one document, stablecoin providers that process over $250 million worth of funds and more than 1 million transactions per day could be forced “to halt issuance until those numbers fall back below the threshold.” Tether would be affected by this regulation. However, the non-paper document does not reflect the opinion of the EU Commission. However, the limits and monitoring of stablecoins could continue to be “discussed at a political level”.


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