Treasury Secretary Janet Yellen Calls for Stablecoin Legislation Amid UST Crisis

Treasury Secretary Janet Yellen is further backing her position on her stance of having stablecoin legislation by the end of this year, when speaking at a May 10 Senate banking hearing. 

In response to a question on stablecoins from Senator Pat Toomey (R-PA), Yellen responded that “it is important, even urgent” that Congress passes stablecoin legislation. She furthered her stance, calling it “highly appropriate” that Congress finalize it by the end of this year. 

Yellen also specifically called out the TerraUSD (UST) drama that transpired the last few days saying: “A stablecoin known as TerraUSD experienced a run and declined in value. I think that this simply illustrates that this is a rapidly growing product and there are rapidly growing risks.”

Yellen put it mildly when saying that Terra experienced a decline in value, the reality is, it was much worse. UST is backed by a $3.5 billion and growing Bitcoin reserve, but fell from its pegged $1 price tag to as low as 62 cents Monday, before regaining some sort of control on Tuesday, according to Bitpush Terminal data. 

UST is currently valued at $0.905 at the time of writing. It will be interesting to see if Terra can recover that remaining 10 cents in order to push it back to the $1 level. 

Toomey himself is also looking to make stablecoins more legitimate and is behind a piece of legislation that seeks to address non-algorithmic stablecoins. His Stablecoin Transparency of Reserves and Uniform Safe Transactions Act calls for a “payment stablecoin” which is redeemable for fiat currency and that is backed by cash, cash equivalent assets or level 1 high-quality liquid assets denominated in United States dollars.

The hearing focused on the responsibility of the Financial Stability Oversight Council, a supervisory regulator that the Treasury Secretary leads. 

Author: Tyler Irvin

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