The stablecoin crash proves we need better regulations to protect consumers
Uncertainty is affecting what used to be the safer end of the market
Save the savings
All of this undermines the basic premise of these coins – 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.
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.
This is why the approach of governments worldwide needs to change. While plenty has been said about regulationin the UKandthe US, there has been little meaningful action.
If they fail to act, it will be difficult to advocate the useof stablecoinsif they continue to expose consumers to the very volatility and risk they are supposed to avoid.
The time for allowing the sector freedom to innovate seems to have passed. Regulation is essential – to offer consumer protection, and ban excessively risky practices – if the potential of stablecoins is to be realized. That potential is something thatmany feelcould revolutionize the global economy, speeding up transactions, reducing costs, and increasing transparency.
But allowing the sector the opportunity to innovate should not come at the expense of people’s 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 news. But two or more could be catastrophic for customer confidence.
Article byMatthew Shillito, Lecturer in Law,University of Liverpool
This article is republished fromThe Conversationunder a Creative Commons license. Read theoriginal article.
Story byThe Conversation
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