The collapse of stablecoins raises global regulatory concerns

Recently, a significant devaluation of an algorithmic stablecoin has triggered turmoil in the cryptocurrency market, and the impact of this event has extended beyond the crypto space, drawing heightened attention from global regulatory authorities.

In early May, an algorithmic stablecoin pegged to the US dollar experienced a severe decoupling, with its value plummeting by 97.7% in just 5 days, reaching a low of $0.04. Another cryptocurrency related to it was also hit hard, with its price nearly going to zero, while in the previous month, the market price of that coin had been as high as $119.

The impact of this event quickly spread, prompting regulatory authorities in multiple countries to take action. On May 17, the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) of South Korea conducted emergency inspections of local cryptocurrency exchanges. The regulators requested the exchanges to provide relevant trading information, including trading volume, closing prices, and transaction quantities, and to assess the measures taken by the exchanges in response.

The South Korean political sector is also paying close attention to this matter. Representatives from the ruling party are calling for a parliamentary hearing on the issue and demanding that executives from relevant companies attend for questioning. At the same time, some political figures have pointed out that certain exchanges may exploit this incident for profit, leading to further controversy.

In the United States, the Treasury is re-evaluating legislative proposals regarding stablecoins. The chairman of the Securities and Exchange Commission (SEC) emphasized that it will continue to fulfill its regulatory responsibilities to protect investors' interests. Some experts suggest that historical regulatory experiences with banks and money market funds could be referenced to address the risks posed by stablecoins.

The UK has taken a clearer stance. The UK Treasury announced that it will advance the stablecoin regulatory plan, but explicitly stated that algorithmic stablecoins are not included. They believe that certain types of stablecoins are not suitable for payment purposes due to their characteristics being similar to those of unsecured crypto assets.

In Europe, the Governor of the French central bank revealed that the regulatory issues surrounding cryptocurrencies will be discussed at the upcoming G7 finance ministers meeting. Representatives from the participating countries may express their views on the regulatory framework related to cryptocurrencies.

This series of events indicates that the development of the cryptocurrency market has attracted significant attention from global financial regulators. Finding a balance between encouraging innovation and protecting investors will be an important issue faced by regulatory authorities in various countries in the near future.