{"id":446943,"date":"2022-05-13T17:53:23","date_gmt":"2022-05-13T14:53:23","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/the-stablecoin-crash-proves-we-need-better-regulations-to-protect-consumers\/"},"modified":"2022-05-13T17:53:23","modified_gmt":"2022-05-13T14:53:23","slug":"the-stablecoin-crash-proves-we-need-better-regulations-to-protect-consumers","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/the-stablecoin-crash-proves-we-need-better-regulations-to-protect-consumers\/","title":{"rendered":"#The stablecoin crash proves we need better regulations to protect consumers"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3dcc21d5989\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3dcc21d5989\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/the-stablecoin-crash-proves-we-need-better-regulations-to-protect-consumers\/#%E2%80%9CThe_stablecoin_crash_proves_we_need_better_regulations_to_protect_consumers%E2%80%9D\" >&#8220;The stablecoin crash proves we need better regulations to protect consumers&#8221;<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/the-stablecoin-crash-proves-we-need-better-regulations-to-protect-consumers\/#Save_the_savings\" >Save the savings<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9CThe_stablecoin_crash_proves_we_need_better_regulations_to_protect_consumers%E2%80%9D\"><\/span>&#8220;The stablecoin crash proves we need better regulations to protect consumers&#8221;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<div>\n                            Some cryptocurrencies have always been fairly volatile, with values soaring or plunging within a short space of time. So for the more cautious investor, \u201cstablecoins\u201d were considered the sensible place to go. As the name implies, they are designed to be a steadier and safer bet.<\/p>\n<p>At the moment though, that stability is proving hard to find. The value of one of the most popular stablecoins, Terra (also known as UST), has fluctuated wildly in the last few days, before dropping dramatically \u2013 and is <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/coinmarketcap.com\/currencies\/terrausd\/\">yet to recover<\/a>.<\/p>\n<p>                <iframe loading=\"lazy\" src=\"https:\/\/fast.wistia.net\/embed\/iframe\/ebq6s0114h?videoFoam=true&amp;autoPlay=true\" title=\"\" allowtransparency=\"true\" frameborder=\"0\" scrolling=\"no\" class=\"wistia_embed\" name=\"wistia_embed\" allowfullscreen=\"\" msallowfullscreen=\"\" width=\"100%\" height=\"100%\"><\/iframe><\/p>\n<p>Before the crash, Terra was in the top 10 crypto assets, with a value of over US$18.7 billion. At the time of writing, this had collapsed to less than <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/coinmarketcap.com\/currencies\/terrausd\/?period=90d\">US$7 billion<\/a>.<\/p>\n<p>Investors have taken to <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.thesun.co.uk\/money\/18542264\/terra-luna-crash-investor-lost-400000-savings\/\">social media<\/a> to lament this development. Some spoke of lost life savings and the devastating impact of the currency\u2019s collapse.<\/p>\n<p>And they are right to be worried. The impact of volatility in the stablecoin arena should not be underestimated and could destabilize the entire sector.<\/p>\n<p>In theory, stablecoins are supposed to offer the transactional benefits of more traditional crypto assets (such as Bitcoin) but with a predictably stable worth.<\/p>\n<p>Many stablecoins are backed by other assets (typically the US dollar) or commodities (often gold) and involve the stablecoin provider buying \u2013 and then holding \u2013 the equivalent amount of their chosen asset to ensure the coin remains stable. So while the value of the underlying asset might increase or decrease, the value of the stablecoin should at least remain at a consistent ratio with whatever underpins it.<\/p>\n<p>But \u201calgorithmic stablecoins\u201d like Terra <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/youtu.be\/KqpGMoYZMhY\">work differently<\/a>. Terra holds no reserve asset or commodity and instead is meant to hold its value using an algorithm, which is designed to maintain a balance between the stablecoin and a partner coin (a more traditional cryptocurrency).<\/p>\n<p>In this case, Terra is tied to a partner coin called Luna \u2013 and the value of Luna has crashed. Its value is now <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/coinmarketcap.com\/currencies\/terra-luna\/\">less than US$0.06<\/a> having been trading at around US$82.00 just seven days earlier. In a climate where the value of Terra and Luna are both drastically declining, the algorithm cannot solve the issue of decreasing faith in the paired currencies \u2013 and the stabilization feature simply does not work.<\/p>\n<p>As a result, fear kicks in and more people sell, just like a traditional bank run, where there is mass withdrawal of funds and sudden drastic loss in value. Stablecoins backed by assets tend to avoid this, due to the long term steady value of their peg which builds consumer confidence.<\/p>\n<p>But they have issues too. Tether, a coin pegged to the US dollar, has had <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.cftc.gov\/PressRoom\/PressReleases\/8450-21\">bumps in the road<\/a> amid questions over whether the company which issues the coins hold the reserves it <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.theverge.com\/22620464\/tether-backing-cryptocurrency-stablecoin\">claims to have<\/a>. And in recent days Tether too has seen its <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/coinmarketcap.com\/currencies\/tether\/\">value fall<\/a>.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Save_the_savings\"><\/span>Save the savings<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>All of this undermines the basic premise of these coins \u2013 that they will remain stable. Customers choose to buy them to either shield against volatility in traditional crypto markets until they rise again, or to use them as a more traditional account (like a regular bank account) and take advantage of the benefits they offer with regard to speed, cost, and ease of international transactions.<\/p>\n<p>But investors with their funds in Terra have seen their savings drop by around half. The fact it has still not stabilized does little to alleviate worries. In simple terms, the potential for a cryptocurrency crisis is very real.<\/p>\n<p>This is why the <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>roach of governments worldwide needs to change. While plenty has been said about regulation <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.gov.uk\/government\/news\/government-sets-out-plan-to-make-uk-a-global-cryptoasset-technology-hub\">in the UK<\/a> and <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.wsj.com\/articles\/yellen-renews-call-for-stablecoin-regulation-after-terrausd-stumble-11652208165\">the US<\/a>, there has been little meaningful action.<\/p>\n<p>If they fail to act, it will be difficult to advocate the use <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/theconversation.com\/plan-to-become-a-cryptoassets-hub-may-just-be-the-uk-government-hedging-its-bets-180717\">of stablecoins<\/a> if they continue to expose consumers to the very volatility and risk they are supposed to avoid.<\/p>\n<p>The time for allowing the sector freedom to innovate seems to have passed. Regulation is essential \u2013 to offer consumer protection, and ban excessively risky practices \u2013 if the potential of stablecoins is to be realized. That potential is something that <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/assets.publishing.service.gov.uk\/government\/uploads\/system\/uploads\/attachment_data\/file\/1066166\/O-S_Stablecoins_consultation_response.pdf\">many feel<\/a> could revolutionize the global economy, speeding up transactions, reducing costs, and increasing transparency.<\/p>\n<p>But allowing the sector the opportunity to innovate should not come at the expense of people\u2019s savings. If withdrawals persist, it will test both the stability of a particular stablecoin, and more broadly, whether the entire sector has a future. One stablecoin struggling is bad <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">news<\/a>. But two or more could be catastrophic for customer confidence.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img decoding=\"async\" loading=\"lazy\" style=\"border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;\" alt=\"The Conversation\" width=\"1\" height=\"1\" class=\"js-lazy\" src=\"https:\/\/counter.theconversation.com\/content\/182886\/count.gif?distributor=republish-lightbox-basic\"\/><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https:\/\/theconversation.com\/republishing-guidelines --><\/p>\n<p><noscript><img decoding=\"async\" loading=\"lazy\" style=\"border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;\" src=\"https:\/\/counter.theconversation.com\/content\/182886\/count.gif?distributor=republish-lightbox-basic\" alt=\"The Conversation\" width=\"1\" height=\"1\" class=\"\" srcset=\"\"\/><\/noscript><br \/>\n<em>Article by <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/theconversation.com\/profiles\/matthew-shillito-160414\">Matthew Shillito<\/a>, Lecturer in Law, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/theconversation.com\/institutions\/university-of-liverpool-1198\">University of Liverpool<\/a><\/em><\/p>\n<p><em>This article is republished from <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/theconversation.com\">The Conversation<\/a> under a Creative Commons license. Read the <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/theconversation.com\/stablecoin-volatility-shows-an-urgent-need-for-regulation-to-protect-consumers-182886\">original article<\/a>.<\/em>\n                        <\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more like this article, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/technology\/\" target=\"_blank\" rel=\"noopener\">Technology category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/thenextweb.com\/news\/stablecoin-crash-proves-we-need-better-regulations\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;The stablecoin crash proves we need better regulations to protect consumers&#8221; Some cryptocurrencies have always been fairly volatile, with values soaring or plunging within a short space of time. So for the more cautious investor, \u201cstablecoins\u201d were considered the sensible place to go. As the name implies, they are designed to be a steadier and&#8230;<\/p>\n","protected":false},"author":1,"featured_media":446944,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/img-cdn.tnwcdn.com\/image\/hardfork?filter_last=1&fit=1280,640&url=https:\/\/cdn0.tnwcdn.com\/wp-content\/blogs.dir\/1\/files\/2022\/05\/SC.jpg&signature=b0a7ed164bafc3622427db1805e7c6f0","fifu_image_alt":"","footnotes":""},"categories":[18],"tags":[],"class_list":["post-446943","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-technology"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/446943","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=446943"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/446943\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/446944"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=446943"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=446943"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=446943"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}