Terra: China to strictly scrutinize stablecoins post LUNA-UST episode?

Lavina Daryanani
Source: Forbes

It has been almost three weeks since the Terra ecosystem collapsed. UST was de-pegged from the dollar during the initial half of May. To save the sinking boat, LUNA blindly dived into the water, but without a life jacket. The result was a catastrophe that devastated the entire crypto market. While most coins were trading red in a collective bearish market, LUNAtics were merely left at the mercy of Do Kwon and co.’s recovery plan.

The aforesaid set of ruthless events managed to grab everyone’s attention from both—inside and outside—the community. Alongside, the whole crypto space’s reputation was tarnished, with crypto hardly remaining in the good books of skeptics. Financial regulators all over the world also got a chance to pinpoint the flaws and express their concerns.

Now, in what is the latest development, China’s Economic Daily—in its Tuesday edition—went on to state that the government should introduce regulatory measures to protect investors from the risk of stablecoins. In fact, per the government-owned media house, the same would also aid in putting a cap on other similar “illegal” and “criminal” activities. Chinese Journalist Colin Wu brought to light that the Terra ecosystem fiasco had triggered the same.

Per the translated version of the piece, reporter Li Hualin penned,

“My country has been cracking down on virtual currency trading speculation and a large number of trading platforms.”

Hualin further added,

“This has effectively blocked the transmission of this risk in China and avoided investment risks to the greatest extent possible.”

The reporter also went on to outline that “many other countries” are currently looking to regulate stablecoins following the Terra collapse. Hualin, in fact, quoted Zhou Maohua—a researcher at the China Everbright Bank—and wrote,

“In the future, our country will also speed up the completion of regulatory shortcomings, and introduce targeted regulatory measures for the risk of stablecoins to further reduce the space for virtual currency speculation, illegal financial activities, and related illegal and criminal activities, and better protect the safety of the people.”