The misfortune of some is the happiness of others – The disaster of the Terra ecosystem and the fall of its stablecoin UST made the fat cabbage of the regulation. Each financial policeman, institution or bank, seems to draw conclusions from this incident. This is the case of the American Congressional Research Center which has looked into this thorny question. Explanations.
The crash of the UST seen by the American financial police
Recently, the US Congressional Research Center (CRC), a legislative institution linked to the US Congress, leaning on the crash of the UST and the Terra ecosystem.
In its report, the institution notes two so-called “relevant” factors to this incident:
- The high yields of the Anchor decentralized protocol (20%) would have attracted too much demand for UST.
- Terraform Labs bought bitcoins, beginning of 2022, kept in the Luna Foundation Guard (LFG). The report then implies that these bitcoins could have been used to support Terra’s stablecoin.
The report then reads skeptical on the second point. The figures point in the direction of doubt since, even if the LFG says it has sold its Bitcoins, it would seem that $3 billion in BTC is still missing.
The implosion of the Terra ecosystem: a new political issue?
The crash of theUST and of LUNA shows that the management of such an event involves political issues. Indeed, Congress emphasizes that decentralized finance does not benefit from the same protections as traditional finance. This would indeed be contrary to the vision of Satoshi Nakamotorbike, founding father of Bitcoin. On the other hand, research by this branch of the US Congress points out that the Terra episode highlights gaps in stablecoin regulatory policy :
“Recent legislative proposals have considered which entities should be allowed to issue stablecoins (…). Safeguarding these digital assets was a central issue. With regard to the disclosure and composition of reserves, there have been some recent legislative projects. These bills provide a possible framework for issuers of stablecoins. For example, while these drafts differ in their approach, they would establish eligible institutions to issue stablecoins to: create disclosure requirements for assets backing stablecoins, provide standards for the composition of those reserves, and consider possibilities of financial support for stablecoins. (…) The Treasury Department is reportedly working on a report regarding TerraUSD. »
The choices of the Research Center in terms of policy can thus make one shudder. The report encourages the development of active regulation in order to support stablecoins but also to frame them in what is described as a political sprint. All are invited in this race: the central banks, the Senate, the SEC among others. The goal? May the Terra disaster not happen again.
The opinion of the US Congressional Research Center underlines only too much the pretext that financial regulators seem to seize upon in the face of the failure of the Terra ecosystem. The SEC, the central banks, all agree to underline that this incident will be the reflection of a sick ecosystem. The Mirror Protocol, ponzi scheme has also recently suffered the wrath of the SEC.
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