US Treasury Secretary Janet Yellen believes that the stablecoin market is not large enough for a collapse in TerraUSD (UST) and Tether ( USDT ) below $1 to threaten the country's financial stability.
In a hearing on Thursday , Yellen said the stablecoin market isn't big enough that a UST drop below $0.40 and a brief USDT drop to $0.96 pose a "real threat to financial stability." would be. Citing a November report by the President's Working Group on Financial Markets, the finance minister said the Financial Stability Board was currently analyzing "potential risks to financial stability" in the area of digital assets.
"They're growing very fast," Yellen said of digital assets. "They present the same kind of risks that we've known about bank runs for centuries.
US Treasury Secretary Janet Yellen before the Senate Banking Committee on Thursday
Yellen added that a U.S. central bank digital currency could have “a very significant impact on the structure of financial intermediation.” However, such a move would potentially entail fewer risks than stablecoins. Shortly before that, at another hearing on Tuesday, she called on lawmakers to develop a "uniform, nationwide framework" for stablecoins to address the risks
The UST lost its peg to the dollar on Monday, after which a mass sell-off triggered extreme volatility in LUNA and many major cryptocurrencies, including Bitcoin ( BTC ) and Ether ( ETH ). The stablecoin is down about 70 percent on Wednesday to hit $0.29 and trades at $0.37 at press time. USDT was down for about 12 hours on Wednesday before climbing back up to $1.
Validators of the Terra blockchain formally shut down the network on Thursday to prevent governance attacks, which have now become much easier after LUNA's violent downturn. Binance also delisted its LUNA/USDT contracts after the price fell below $0.005.
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