For Janet Yellen, stablecoins do not pose a serious threat to financial stability, and she is betting on CBDCs.
US Treasury Secretary Janet Yellen has weighed in on the latest developments in the crypto market, following the abrupt fall of algorithmic stablecoin Terra and the brief decoupling of Tether from the dollar.
UST, Terra's algorithmic stablecoin, was pegged to the dollar until Monday, when a Massive sell-off triggered extreme volatility in LUNA price and other cryptocurrencies such as Bitcoin y Ethereum, causing the price of UST to fall by 70% to $0,29. The market crash also caused Tether’s stablecoin, USDT, to be delinked from the dollar for several hours.
Janet Yellen is calm about stablecoins
The official has tried to reassure general opinion, assuring that the stablecoin market has a too small a scale to pose a real danger to financial stability.
At a House Financial Services Committee hearing on the Financial Stability Oversight Council’s Annual Report to Congress on Thursday, Yellen hinted that the size of the stablecoin market is not yet at a scale to create a “real threat to financial stability.”
In this regard, the Treasury Secretary cited a November report from the President's Task Force on Financial Markets and said the council was currently analyzing the "potential risks to financial stability” in the cryptocurrency and digital asset ecosystem.
Speaking about digital assets, Janet Yellen noted that “they are growing rapidly, so they pose the same kind of risk that we have known about for centuries in relation to bank runs.”
Central Bank Digital Currencies: A Possible Solution
Secretary Yellen added that a central bank digital currency (CBDC) in the United States could have an impact “very significant in the structure of financial intermediation"and have much fewer potential risks than stablecoins.
The comments came after the Treasury Secretary addressed the Senate Banking Committee at a hearing on Tuesday, where she called on lawmakers to develop a “coherent federal framework” on stablecoins to address potential risks.
The problems of Terra and LUNA
As we have already explained in a previous news, the Terra Blockchain Validators have officially halted network activity in order to prevent governance attacks following the devaluation of LUNA.
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