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Bulletins

Yellen cites UST stablecoin risk after it loses its dollar peg

The crypto industry scrambles as major stablecoin loses its peg to the dollar.

Janet Yellen

Yellen said UST had "experienced a run" at a Senate Banking Committee hearing Tuesday.

Photo: Stefani Reynolds/AFP/Getty Images

Treasury Secretary Janet Yellen expressed concern about the troubles with UST, a stablecoin that has lost its dollar peg in recent days.

She said UST had "experienced a run" at a Senate Banking Committee hearing Tuesday .

Stablecoins have come under increasing scrutiny by regulators because of their growth and potential to cause a systemic risk to the financial system.

The algorithmic stablecoin UST, which is on the Terra network, is designed to keep a one-to-one peg with the U.S. dollar. But the stablecoin lost its peg over the weekend, dropping as low as $0.60.

It's not clear what caused the stablecoin to lose its peg. UST is listed as the 10th largest cryptocurrency by market cap.

Over the weekend, Luna Foundation Guard, a nonprofit which supports the network and includes Jump Crypto, responded to the depeg by saying it would loan bitcoin and UST funds to defend UST's peg to the dollar.

Instead of being backed by dollars, UST is designed to keep its peg through a complex system connected with another Terra network token, LUNA.

The SEC has previously issued a subpoena for Terraform Labs, the creator of Terra, and its CEO Do Kwon.

Tomio Geron

Tomio Geron ( @tomiogeron ) is a San Francisco-based reporter covering fintech. He was previously a reporter and editor at The Wall Street Journal, covering venture capital and startups. He was also as a staff writer at Forbes covering social media and venture capital, and edited the Midas List of top tech investors. He can be reached at tgeron@protocol.com or tgeron@protonmail.com.

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