The market value of TerraUSD, the world's fourth largest "stable currency", plummeted by more than 70% in one day on Wednesday (12th), and once fell from 1:1 to 1:0.26 against the US dollar. On the same day, the stable currency Terra (Luna) also fell by more than 98%.
The incident attracted the attention of the U.S. financial regulator, and Treasury Secretary Yellen re-emphasized the urgency of formulating a regulatory framework for stablecoins and called on Congress to authorize the regulation of stablecoins.
"Stablecoin" is a type of cryptocurrency. Unlike the common decentralized cryptocurrency, "stablecoin" is linked to one or more currencies or major commodities to ensure its value, so it is called "stable".
TerraUSD claims to be pegged at 1:1 with the US dollar, but unlike the real US dollar, it is just a cryptocurrency derived from an algorithm by South Korea's Terra Company, and its issuance is not guaranteed by the US government's sovereignty. Hook is just a kind of credit, and since there is no institution to guarantee its value, as long as there are funds deliberately short-selling, its value will plummet.
Emerging currencies emerge endlessly
Since the rise of Bitcoin, cryptocurrencies and various emerging currencies have sprung up like mushrooms.
Under this upsurge, there are decentralized currencies such as Bitcoin, and centralized cryptocurrencies such as stablecoins that are linked to a certain currency or commodity, and even more recently, which can appear in various forms, And non-fungible tokens (NFTs) that are not interchangeable with each other.
Over time, there may be more types of so-called "currency" in society.
Therefore, what needs to be regulated is not only stable coins, but also many virtual currencies.
These different forms of "currency" are not necessarily worthless, but they may be deliberately hyped or short-sold like TerraUSD, or they may become a new type of scam.
Systemic risks exist, but due to the novel concept of these virtual currencies, the existing laws may not be able to effectively supervise them, and there are loopholes.
Taking stablecoins as an example, although they call themselves a "currency", they are only a common commodity in trading, not even securities. They can bypass the supervision of financial products, and their transactions may become part of systemic risks.
In the past, the stablecoin market was dominated by USD stablecoins.
Hong Kong should also introduce regulation as soon as possible
These high-risk financial products are not just a problem for the United States, and Hong Kong should also pay attention to their risks.
In particular, in recent years, more and more Hong Kong people have invested in the virtual currency market, and many people hope to start businesses through emerging methods such as NFT.
As these things become more popular in Hong Kong, the government should update the laws as soon as possible to ensure they are regulated accordingly.
However, so far, there is no corresponding financial supervision of virtual currency in Hong Kong.
For example, the Hong Kong Monetary Authority pointed out that Bitcoin is not legal tender, but a "virtual commodity" whose value is not backed by physical or issuer, so it has no fixed value, and it is not under the supervision of the Hong Kong Monetary Authority.
Bitcoin, which has existed for many years, has no corresponding financial management, and other emerging virtual currencies are even more difficult to be regulated.
In order to correctly guide the virtual currency boom and avoid it becoming a financial risk, the government should also launch corresponding regulatory policies for virtual currency as soon as possible.
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