The recent collapse of Terra could accelerate lawmakers' regulation of cryptocurrencies, according to Jeremy Allaire.
Terra's UST was the third largest stablecoin on the market a few weeks ago, behind USDT and USDC. However, UST is now unpegged to the USD and has lost its position as one of the best stablecoins on the market.
Circle CEO Jeremy Allaire said that the collapse of Terra could accelerate cryptocurrency regulation by lawmakers in different parts of the world. He mentioned this in a recent interview with Yahoo Finance :
"If you have a big blast, it will certainly accelerate the need for Congress to act and set some limits on who and what is involved in operating a dollar stablecoin in the United States of America."
The Anchor Protocol was the largest decentralized finance (DeFi) project on the Terra blockchain. According to Allaire, the high interest rates that Anchor offers depositors should have been an early indicator that the Terra system was unsustainable over the long term.
“I think what played out with these unstable stablecoins like UST was entirely predictable. Our own analysis from a long time ago suggested that the foundation this stood on was really based on subsidizing those returns, which made people buy that Luna token, create those UST tokens, put them in plugging in that 20% interest rate, which was too good to be true.”
Allaires made the comments days after US Treasury Secretary Janet Yellen called for new crypto regulations in the wake of the Terra Crisis. She said:
"I wouldn't call [cryptocurrencies] a real threat to financial stability on this scale, but they're growing very quickly and pose the same risks that we've known about bank runs for centuries."
LUNA, the native coin of the Terra ecosystem, has lost its place among the top 10 cryptocurrencies by market cap. It now occupies the 211th position in the cryptocurrency market. Allaire concluded:
“I think this regulatory clarity stands between the broad mainstream adoption of crypto infrastructure for commerce and finance applications on a global scale. And I think we now have the impetus to see that.”
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