The collapse of UST could hasten US crypto regulation

The CEO of Circle has said ‘unstable stablecoins was entirely predictable’

Crypto regulation law in US, gavel, flag and bitcoin                                 
Crypto regulation law in US, gavel, flag and bitcoin - Photo:Alamy
                                

The collapse and depegging of TerraUSD (UST) could lead to the acceleration of US crypto regulation, according to Jeremy Allaire, CEO of Circle, the pioneering peer-to-peer payments technology company behind Circle Pay.

The American-born Allaire, who founded Circle in 2013, told Yahoo Finance “When you have a major blow up, it’s certainly going to accelerate the need for Congress to act and establish some perimeters around who and what is involved in operating a dollar stablecoin in the USA.”

Echoing Sam Bankman-Fried, CEO of FTX, the cryptocurrency derivatives exchange, Allaire said: “I think what has unfolded with these unstable stablecoins, such as UST, was entirely predictable.” Bankman-Fried also said the UST blowout was “predictable”.

Allaire said he felt there were several “very viable legislative proposals” that the federal government have discussed and could be used to govern the crypto industry.    

Regardless of regulation arriving, Allaire said he felt that the incident had provided a death blow to retail crypto investors and the industry as a whole, and the need for regulation had intensified.  

According to CoinMarketCap, UST has dropped to $0.12 despite being pegged to the US dollar.

‘Rapidly growing’ crypto space

The US Treasury Secretary, Janet Yellen said in the wake of the UST price crash that the digital asset space is “rapidly growing”.

On 12 May, Yellen speaking to the US House Financial Services Committee said: “I wouldn’t characterise it at this scale as a real threat to financial stability, but they’re growing very rapidly, and they present the same kind of risks that we have known for centuries in connection with bank runs. 

"We really need a regulatory framework to guard against the risks.”   

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