The Terra crisis stirs up regulatory concerns about the 180 billion dollar stable market market

A crisis that devours one of the world's largest stable coins has intensified and sparked the concerns of the supervisory authorities about the assets that support the global cryptocurrency market.

Terrausd, which tries to consistently reproduce the dollar with a value of $ 1, collapsed on a low of 30 cents on Wednesday, which is one of the most famous examples that a stable coin breaks through its so -called binding. Stabilization attempts by the Luna Foundation Guard - which behave like a central bank for the token - have failed.

The episode has soaked the concern of the financial supervisory authorities about the rising risks, which the 180-billion dollar stable industry for traditional markets represents, with fresh fuel, since crypto is more integrated into conventional payment and banking systems.

"A stable coin known as Terrausd experienced a run and lost value," said US finance minister Janet Yellen on Tuesday. "I think this simply shows that this is a rapidly growing product and there are rapid risks."

StableCoins are supposed to offer crypto investors a safe port so that they can stow digital cash and easily switch between different cryptocurrencies. In general, you claim to be covered by a basket of dollar assets.

Terra, which was one of the five best stable coins on the market at the beginning of this week, is different. It is a so -called algorithmic stable coin that tries to pursue the dollar by increasing its amount or reduces coin in circulation, as it deviates from the value of the dollar, partly with a relationship with Luna, a cryptocurrency.

Regardless of the structure behind stable coins, the regulatory authorities have been concerned about their role for some time. The Federal Reserve, the European Central Bank and the Bank of England have all warned of the risks of stable coins and in particular from their connections to the traditional financial system.

In its regular financial stability report this week, the Fed found that only three - Tether, USD Coin and Binance USD - made up about 80 percent of the overall market.

It warned that even stable coins that are covered by reserves can "lose value or become illiquid in stressful situations", and added that "these weak points can still be tightened by a lack of transparency in relation to the risk and the liquidity of assets that support the stable coins".

Ilan solot, partner of the crypta group Tagus Capital, said: "The abdominal reaction is to throw [Terrausd] debacle as bad news from a regulatory point of view - and that could turn out". However, he said that it could also highlight the differences between algorithmic coins and those that are covered by a basket of reserves.

The terrausd situation that occurred on the cryptoma markets during a week of intensive volatility increases the general concern about the largely unregulated stablecoin industry. Tether, the market leader, only provides limited details about the specific stocks of traditional financial investments that support its bond on the US dollar. In October 2021, the US Commodity Futures Trading Commission made a fine of $ 41 million against Tether after the company allegedly made "untrue or misleading statements and versions of essential facts" with regard to its reserves.

In a research note on Wednesday, UBS said that the Terrausd episode "will probably also increase the focus of the supervisory authorities on USDC and Tether, which are not yet systemically relevant for wider financial payments, clearing and handling, but are licking and fishing points of the crypto trade industry". .

In a series of Twitter messages, Terra co-founder Do Kwon told the members of the "Terra Community" on Wednesday that "I understand that the last 72 hours were extremely hard for them-they know that I am determined to work with everyone to survive this crisis, and we will work out our way from it."