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A2 UP FRONT
Wednesday 8 June 2022
Crypto meltdown is wake-up call for many, including Congress

Continued from Front by Terra’s failure,” said
Perianne Boring, founder
Stablecoins are supposed of the Chamber of Digital
to be less vulnerable to big Commerce, one of the top
swings — thus the name — lobbyists for the cryptocur-
but Terra suffered a spec- rency industry.
tacular collapse in a matter Other crypto lobby groups,
of days. like the Association for Digi-
The Terra episode pub- tal Asset Markets, have an-
licly exposed a truth long- nounced support for the
known in the always-online Lummis-Gillibrand bill.
crypto community: for ev- One idea that Washington
ery digital currency with seems to be coalescing
staying power, like bitcoin, around is that entities that
there have been hundreds issue stablecoins — often
of failed or worthless cur- used as a bridge between
rencies in crypto’s short his- traditional finance and the
tory. So Terra became just crypto world — need to be
the latest “sh—coin” — the transparent about the as-
term used by the commu- sets backing them and be
nity to describe coins that as liquid as any other instru-
faded into obscurity. ment playing a key role in
Terra’s quick collapse finance.
came just as bitcoin, the Sen. Pat Toomey, R-Penn-
most popular cryptocur- sylvania, is circulating a
rency, was in the midst of Sen. Kirsten Gillibrand, D-N.Y., speaks during a news conference May 5, 2022, on Capitol Hill in separate bill that would
a decline that has wiped Washington. require stablecoin provid-
out nearly half of its value Associated Press ers to have a license to op-
in a couple of months. The value pegged to roughly invested in that,” Estrabillo On Tuesday, Sen. Kirsten erate, restrict the types of
events have served as a $1.00. Critics of Terra would lamented. Gillibrand, D-New York, assets they carry to back
vivid reminder that inves- be attacked on social me- Washington may also be and Sen. Cynthia Lummis, those stablecoins, as well
tors, both professionals and dia by Kwon and his so- waking up to the fact that R-Wyoming, proposed a as be subject to routine
the mom and pop variety, called army of “LUNAtics” what used to be niche part framework to start regu- auditing to make sure they
can be rolling the dice Kwon’s promise turned out of the internet and finance lating the industry, which are complying.
when it comes to putting to be worthless. A massive has gone mainstream and would include giving the Describing Terra as a “de-
money into digital assets. selling event caused Terra can no longer be ignored. Commodity Futures Trading bacle,” Toomey said in an
After being mostly hands- to “break the buck” and The total value of crypto Commission full regulatory interview that Terra’s col-
off toward crypto, it ap- collapse in value. Reddit assets hit a peak of $2.8 tril- jurisdiction over cryptocur- lapse made it even more
pears that Washington has boards dedicated to Terra lion last November; it’s now rencies such as bitcoin and important that Washing-
had enough. On Tuesday, and Luna were dominated below $1.3 trillion, accord- rewriting the tax code to in- ton build some guardrails
two senators — one Demo- for days by posts referenc- ing to CoinGecko. Surveys clude crypto. It would also around stablecoins. Toom-
crat and one Republican ing the National Suicide show that roughly 16% of fully regulate stablecoins ey is the top Republican on
— proposed legislation Prevention Hotline. adult Americans, or 40 mil- for the first time ever. the Senate Banking Com-
that seeks to build a regu- Terra’s ascendance at- lion people, have invested This comes after the Biden mittee.
latory framework around tracted not only retail in- in cryptocurrencies. Retire- administration’s working “It’s always difficult to get
the cryptocurrency indus- vestors but also better- ment account giant Fidel- group on financial markets anything across the goal
try; other members of Con- known cryptocurrency ity Investments now offers issued a 22-page report last line in the Senate, but
gress are considering more experts. One notable “Lu- crypto as a part of a 401(k) November, calling on Con- there’s nothing politically
limited legislation. natic” was billionaire Mike plan. Sen. Cory Booker, D- gress to pass legislation that polarizing about creating a
What’s surprising, however, Novogratz, who tattooed New Jersey, has repeated- would regulate stablecoins. statutory regime for stable-
is that the cryptocurrency his upper arm with the word ly pointed out that crypto is One recommendation in- coins,” Toomey said.
industry is signaling its co- Luna and a wolf howling at particularly popular among cludes a requirement that After Terra’s collapse there
operation. Politicians, cryp- the moon. Novogratz told Black Americans, a com- stablecoin issuers become are two remaining big sta-
to enthusiasts, and industry his followers that the tattoo munity long distrustful of banks that would hold suf- blecoins: USD Coin issued
lobbyists all point to last “will be a constant remind- Wall Street. ficient cash reserves. by the company Circle,
month’s collapse of Terra er that venture investing re- Further, crypto has per- Treasury Secretary Janet and Tether, created by the
and its token Luna as the quires humility.” meated popular culture. Yellen has also called for Hong Kong-based compa-
possible end of the libertar- Michael Estrabillo entrusted Numerous Super Bowl ads stablecoin regulation, say- ny Bitfinex. Both hold hard
ian experiment in crypto. his crypto investments to touted crypto. Sports are- ing “we really need a regu- assets to back their value,
Stablecoins are typically stablegains, an investment nas are now named af- latory framework to guard but Bitfinex is less transpar-
pegged to a traditional fi- vehicle that he says had ter crypto projects and against the risks,” during a ent about the assets it holds
nancial instrument, like the assured him and other in- the Washington Nation- House committee meeting and is not audited. There
U.S. dollar, and are sup- vestors that the funds were als baseball team took a in May. are also a host of smaller
posed to the cryptocurren- secured in USD Coin, one sponsorship deal from Terra Further, it appears that the stablecoin issuers, which in
cy equivalent of investing of the largest stablecoins. before it collapsed. Celeb- cryptocurrency industry — the world of crypto could
in a conservative money Then, on May 9, he said he rities routinely shill crypto on with its libertarian leanings become the latest hot item
market fund. But Terra was was informed his money social media, and YouTube and deep skepticism of overnight.
not backed by any hard was locked up in Terra. personalities generate mil- Washington — might also “It’s not just urgent that
assets. Instead, its founder “Had I known I was in- lions of views talking about be on board. Washington step in, it’s ur-
Do Kwon promised that volved in a currency that the latest crypto idea. “I do think this is a bit of gently urgent,” said Jeremy
Terra’s proprietary algo- was backed by an algo- Terra’s collapse was a a wake-up call. A lot of Allaire, founder and CEO of
rithm would keep the coin’s rithm, I would have never bridge too far, it seems. people were taken aback Circle, in an interview.q