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Odaily Translator | Nian Yin Si Tang

Summary:

Summary:

- U.S. Treasury Secretary Yellen believes that the $2 trillion market capitalization of cryptocurrencies does not pose a systemic risk.

- Yellen also talked about the recent debacle of the Terra stablecoin UST.

U.S. Treasury Secretary Janet Yellen told lawmakers on Thursday that she doesn't think the cryptocurrency market has grown to the point where it poses a "systemic risk" -- a risk that could spark a flurry of new regulations measure.

Yellen made the remarks while attending a meeting of the House Committee on Financial Services, where members pressed her on macroeconomic issues, while also repeatedly bringing up the topic of stablecoins and the current crypto market meltdown.

"I can't say that the scale of (stable currency) has reached the point where people worry about financial stability." Yellen gave his own opinion.

Her point was made in response to a question from Rep. Jim Himes (D-CT). The latter pointed out that he has experienced the 2008 financial crisis, and he does not think that the $2 trillion encryption market is large enough to cause systemic risks. Himes added that the $2 trillion figure is much lower now given the recent collapse of the crypto market. As of press time, CoinMarketCap data shows that the current overall market value of cryptocurrencies is about $1.3 trillion.

While Yellen agreed with Himes that a market capitalization of $2 trillion is insufficient to trigger a designation of systemic risk, she declined to say at what level -- say $5 trillion or $6 trillion -- it would be deemed for systemic risk.

Following the 2008 financial crisis, Congress introduced legislation designating certain large financial entities, including banks and insurance company AIG, as posing "systemic risks" to the U.S. economy and imposing a range of regulatory measures on their business operations, including capital reserve.

Yellen also noted that while cryptocurrencies and stablecoins do not currently meet the systemic risk threshold, that could change in the future.

"I wouldn't describe it (yet) as a real threat to financial stability, but they've grown very fast and present the kind of risk we've known for centuries from bank runs," she said.

The hearing also discussed the recent collapse of the Terra USD (UST) token, a stablecoin that until this week was the third largest stablecoin in the crypto market.

Yellen pointed out that UST should have been pegged to $1 (CoinMarketCap data shows that UST is currently trading at $0.1695, down 72.83% in 24 hours), but it has "fallen below $1," while Tether, the largest stablecoin ( USDT) also briefly dipped below $1 on Thursday morning. Data show that Tether once fell to 95 cents, but has now recovered to 1 dollar.

In response to a question from Rep. Himes, the Treasury secretary also said she was aware of the difference between algorithmic stablecoins such as UST and other stablecoins backed by U.S. dollar reserves. Algorithmic stablecoins such as UST rely on financial incentives to maintain a peg to the U.S. dollar, while others are backed by U.S. dollar reserves.

Rep. Stephen Lynch (D-MA) also raised the issue of stablecoins, pointing out that there are more than 200 stablecoins in the crypto market, and said that issuing a central bank stablecoin (that is, a central bank digital currency) would help eliminate most stablecoins. currency.

Yellen noted that financial regulators are studying the feasibility of central bank digital currencies, but she noted that such currencies could pose privacy risks if they allow the government to monitor people's spending.