US Treasury Official: Stablecoin UST’s Collapse “Wake Up Call’ For Crypto

It was promising to see no contagion to the banking system as a result of UST’s demise, the official said

article-image

Source: Shutterstock

share

key takeaways

  • UST’s collapse highlights areas where the industry needs work, the official said
  • The majority of speakers agreed on the need for regulatory clarity

Cryptocurrency is growing dangerous fast, a US Treasury official said Tuesday. 

Michael Hsu, acting director of the Office of the Comptroller of the Currency, told attendees at the DC Blockchain Summit that the fallout from the stablecoin UST’s de-pegging from its one-to-one standing with the US dollar should “serve as a wake up call and an opportunity to reset and recalibrate the problems the industry is trying to solve.”

It was promising that there was no contagion to the banking system as a result of the de-pegging, Hsu said, but this further highlights the need for safe havens outside of crypto. 

“No banks are under stress, or even rumored to be under stress due to crypto exposure,” Hsu said. “This absence of stress has allowed the traditional banking system to remain a source of strength to households and businesses in the recent financial market volatility.” 

Yield farming — in which cryptocurrency holders stake their assets in exchange for fixed-income-like returns — associated with UST was particularly alarming, Hsu said. 

“Yield farming today may have more in common with Ponzi schemes than productive innovation,” he said. “Hype-driven economy presents real challenges for those truly interested in productive innovation in protecting consumers.” 

While Hsu’s tone was harsher than other speakers, the notion that true innovators want and need to act within regulatory guidelines was shared universally. 

“The priority now…is responsible innovation,” said Sulolit Mukherjee, global head of tax at crypto exchange Binance. “Good actors and institutional investors are waiting for more clarity in the space.”

Hsu is eager to clarify the guardrails around the industry, too. 

“Although I remain a crypto skeptic, I’ve come to see its potential and understand why there’s so much excitement about the industry,” he said. “The OCC will continue to take a careful and cautious approach [with] crypto in order to ensure the national banking system is safe and sound.” 


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 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.

recent research

kamino cover.jpg

Research

Kamino has solidified its position as the leading money market on Solana and is emerging as a DeFi bluechip. Although DeFi competition is fierce, Kamino has kept iterating on its product to provide the best-in-class UX, paired with a robust risk management framework and battle-tested infrastructure. Given the rollout of Kamino Lend V2, the protocol may scale aggressively over the coming months, penetrating previously untapped markets in Solana DeFi.

article-image

Also in the tokenized fund space, Franklin Templeton launches on Base and Securitize hits $1 billion in tokenized RWA onchain

article-image

It turns out that bitcoin never actually hit an all-time high in March. Thanks a lot, inflation.

article-image

Spire, Citrea and Nillion also announced raises this week

article-image

The latest recipient of an SEC Wells notice is a Web3 gaming company

article-image

Thursday’s selloff was led by tech stocks, triggered by disappointing outlooks from giants Meta and Microsoft

article-image

Historically, positive returns have been a bit more of a toss-up during the year’s 11th month