UST’s Collapse Might Push Central Banks Closer to a CBDC

Industry members weigh in on how the fall of TerraUSD might affect government policy relating to a central bank digital currency

article-image

Source: Shutterstock

share

key takeaways

  • The UST situation could accelerate talks of a CBDC in the US
  • Even if lawmakers agree on establishing a CBDC, there is still concern over structure and role, others say

The ongoing TerraUSD meltdown might be the final push central bankers need to more seriously consider establishing a central bank digital currency, some industry experts say. 

UST collapsed dramatically last week after a weekend de-pegging from its goal base-price of $1 precipitated a spiral downward to a low of $0.126 early Monday, according to CoinGecko. The token’s adjacent cryptocurrency, LUNA, plummeted from $86 last week to near $0 at time of publication.

Some industry members predict the conversation may soon shift to the need for a reliable, state-run CBDC. 

“There is a demand for digital money, whether that comes in the form of stablecoins or it comes in the form of a central bank issued instrument,” said Jonathan Dharmapalan, CEO of eCurrency, which provides technology for central banks to issue and distribute CBDCs. 

“Accelerating our efforts to provide a truly stable United States dollar…I think that is a conversation that’s going to have to be put on the table.” 

The situation has accelerated debate around stablecoin policy and regulation in the US. US Treasury Secretary Janet Yellen has doubled down on her plea to Congress to create policy around who is allowed to issue stablecoins.

“There has been a lot of talk about stablecoin regulation and we have not landed on what is going to become law,” Dharmapalan said. “Then once it becomes law, who then regulates stablecoins? Is it the people who regulate banks, is it going to be the people who regulate securities? There’s debate about which entity becomes a regulator of stablecoins.” 

Lawmakers on the hill have signaled the need for greater understanding of what a CBDC might look like in the US, Kristin Smith, executive director of the Blockchain Association, said. 

“I think [the UST situation] is certainly a factor that will go into future debates on CBDCs, but I still think the challenge with CBDCs is that there are still many questions around what the design could look like,” Smith said. “Then there’s also just the issue of the time it would take for a decision to be made and for technology to be deployed.” 

The Treasury will issue a “comprehensive report” on cryptocurrencies and stablecoins “shortly,” Yellen said last week, as part of a request from the President’s Working Group on Financial Markets (PWG). She also stressed that Congress should be working on stablecoin legislation too, saying that it is “highly appropriate” this gets done by the end of 2022. Even so, tangible policy is still likely a long way off, Smith said. 

“I still think that’s many, many years out from happening, and by that time, I think we’re going to have a very mature stablecoin market,” Smith said.

“Our financial services system is going to look significantly different than it does today, and so the need for one might not be as acute by the time we reach that time.”

Besides, other industry experts said, a CBDC is not interchangeable with a stablecoin, and the two types of digital currency play different roles.

“The main advantage of stablecoins is the large reach, user base and solid reputation of traditional financial institutions,” Anton Chashchin, managing partner of Bitfrost.io, said.I believe that algorithmic stablecoins do not need to be included in the CBDC system. As the recent case with UST showed, there are still significant risks to address, which need to be resolved.”


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Featured.png

Research

Helium stands at a pivotal moment in its evolution as a decentralized wireless network, balancing rapid growth, economic restructuring, and global expansion. With accelerated growth in domestic DAUs and Hotspots supporting its network, Helium is leveraging strategic partnerships and innovative proposals to scale internationally. The recent implementation of HIP 138, “Return to HNT,” has unified its token economy under HNT, simplifying participation and strengthening liquidity, while HIP 139’s phase-out of CBRS refocuses efforts on scalable Wi-Fi offload. Meanwhile, governance shifts under HIP 141 raise questions about centralization as Nova Labs consolidates control over the roadmap.

article-image

Dragonfly’s Rob Hadick discussed how the firm is approaching investments in the current market

article-image

The asset surged over the past seven days to reach its highest-ever weekly close on the SOL/ETH pair

article-image

Industry watchers note that SOL ETFs have attracted a fraction of the demand for bitcoin and ether ETFs

article-image

Tariff swings impact stock market and company outlooks, with Apple and NVidia likely to be affected by China tariffs

article-image

The team says an attacker minted unclaimed tokens from ZKsync’s 2024 airdrop

article-image

The MIT research-based protocol is live in private testnet — laying the foundation for decentralized RAM