Crypto lobbyists fear legal crackdown

Lobbyists are hoping to get the ear of US lawmakers to contain the collapse of TerraUSD, which has cost investors billions worth of cryptocurrency already.

The Blockchain Association and the Chamber of Digital Commerce, which protects the interests of some of the most prominent cryptocurrency companies, has been responding to lawmakers who want to know how a stablecoin can lose 90% of its value.

Stablecoins have an implied stability that is pegged to the value of the US dollar, but this was not the case with TerraUSD which went down so quickly that people have been left penniless.

Lawmakers are particularly interested in the real reasons behind the crash of the stablecoin. Was this crash preventable?

Responding to these questions, the associations have called for caution over a crackdown in case it triggers another fall in the net valuation of these currencies.

Blockchain Association executive director Kristin Smith said: “The one thing we’ve been cautioning to the Hill is that we don’t want to accidentally throw the baby out with the bathwater, because stablecoins we think are a really critical piece of the crypto ecosystem going forward.”

This argument sounds familiar as it has been reiterated by the likes of Elon Musk and Mark Cuban who said that currencies are going through the same growing pains that the internet did.

In theory stablecoins should not diminish in value, let alone crash. However, this is precisely what has happened with TerraUSD. With this in mind, there have been calls from G7 leaders, the IMF and central banks around the world to start looking into stablecoins and regulate them.

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Updated: 05/19/2022 — 13:00