The United States Treasury Secretary Janet Yellen doesn’t think that the stablecoin market is in a position to pose financial stability.
Yellen believes that the free fall of TerraUSD and fluctuations of Tether would presently not pose a threat to the country’s financial stability. Yellen spoke at the hearing of the House Financial Services Committee on Thursday on oversight of the financial stability to Congress. She spoke about the stablecoin market and the plummeting of UST below $0.40 and USDT slightly falling below $1.
Yellen stated that the stablecoin market is not at present at a size to destabilize the country’s financial market.
Yellen thinks that the digital assets are growing rapidly
The treasury secretary announced that the council is currently analyzing the potential threats that digital assets can cause.
“They’re growing very rapidly,” said Yellen, referring to digital assets. “They present the same kind of risks that we have known for centuries in connection with bank runs.”
She also believes that a central bank digital currency (CBDC) might also pose a very similar threat as compared to digital assets, even though it’s less risky than stablecoins. She also asked the banking committee to develop a consistent framework to address the risks involved with stablecoins.
A huge sell-off on Monday caused tremendous volatility to UST that was pegged to the dollar. As an aftereffect, the price of LUNA, as well as several other major cryptocurrencies such as Bitcoin (BTC) and Ether (ETH), fell hard.
On Wednesday, the stablecoin fell about 70% to $0.29 and is currently trading at $0.40 at the time of writing. On the other hand, beginning on Wednesday, the USDT was depegged for around 12 hours before reverting to $1.00. The entire LUNA scenario has caused a devastating effect that put the money of a lot of investors in jeopardy.