The recent slump in the cryptocurrency market negatively influenced the Terra ecosystem, with its tokens, LUNA and UST, collapsing in value. As a result, a U.S Treasury official has concerns about crypto’s development and how it can become dangerous without proper regulation.
Michael Hsu, director of the Comptroller of the Currency, attended a recent DC Blockchain Summit where he addressed the de-pegging of UST and USD. Hsu stated that this event should be a clear pointer that there need to be regulations if blockchain technology wants to achieve its objectives.
Traditional Banking Free from Terra and Crypto Collapse
The director, however, noted in delight that the effects of the drop did not impact the banking system. Furthermore, Hsu aimed at yield farming, calling it a type of Ponzi that consumers should avoid. UST investors were tempted with massive returns, running up to 20% of their investments during its peak.
“Yield farming today may have more in common with Ponzi schemes than productive innovation; hype-driven economy presents real challenges for those truly interested in productive innovation in protecting consumers.”
While Hsu aired his opinion assertively compared to other vital speakers, there was a unanimous agreement that the crypto industry needs solid regulatory policies to keep events such as Terra’s fall at bay.
He said that OCC would take a conservative approach toward crypto:
“The OCC will continue to take a careful and cautious approach towards crypto to ensure the national banking system is safe and sound.”
One of the most significant challenges facing the crypto industry’s development is the lack of proper legal guidance and regulations, which has influenced the adoption rate by institutions.
The current crypto players are primarily interested in direct investments rather than building utility. However, the lack of clear regulations has left many potential investors losing more than gaining.
Binance’s head of tax, Sulolit Mukherjee, was among the speakers at the Summit. He said,
“The priority now…is responsible innovation. Good actors and institutional investors are waiting for more clarity in the space.”