Regulators are growing anxious about stablecoins after Terra’s stunning collapse

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Regulators are growing anxious about stablecoins after Terra’s stunning collapse

Regulators are getting increasingly worried about stablecoins after the collapse of controversial cryptocurrency venture Terra. , an "algorithmic" stablecoin that's meant to be pegged one-to-one with the , has erased much of its value this week after a stunning run on the bank that saw billions of dollars suddenly evaporate from its market value. Also known as UST, the cryptocurrency operated using a complex mechanism of code combined with a floating token called luna to balance supply and demand and stabilize prices, as well as a multibillion-dollar pile of . , the world's biggest stablecoin, also slipped below its intended $1 for several hours on Thursday, fueling fears of a possible contagion from the fallout of UST de-pegging. Unlike UST, tether is supposed to be backed by sufficient assets held in a reserve. U.S. Treasury Secretary Janet Yellen directly addressed the issue of both UST and tether "breaking the buck" this week. In a congressional hearing, Yellen said such assets don't currently pose a systemic risk to financial stability — but suggested they eventually could. "I wouldn't characterize it at this scale as a real threat to financial stability but they're growing very rapidly," she told lawmakers Thursday. "They present

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