Tether claims that his token, pegged to the dollar, is “fully secured”.

Justin Talis Afp | Getty Images

Investors have snatched more than $ 10 billion from the peg over the past two weeks amid heightened regulatory oversight of stablecoins.

According to CoinGecko, Tether, the world’s largest stablecoin, fell from a record $ 84.2 billion on May 11 to about $ 73.3 billion as of Monday. About $ 1 billion was withdrawn late Friday night.

The cryptocurrency, which is due to be pegged to the U.S. dollar, temporarily fell 95 cents on May 12 after another type of stablecoin, terraUSD or UST, fell well below $ 1. This led to the sale of the UST-linked token luna, which in turn destroyed the wealth of the owners of more than $ 40 billion.

The aftermath of Terra, the blockchain behind UST and luna, shocked cryptocurrencies, with bitcoin and other cryptocurrencies falling sharply. This is of concern to regulators.

“Whenever there is a failure or catastrophe in the crypt, there is always the fear that someone will misread the situation and take a position that is not good for the whole community,” said Kathleen Breitman, co-creator of the Tezos blockchain. CNBC.

“No matter how much I like to see things that don’t make sense fail, there’s always a tinge like, ‘Are people going to extrapolate from the fact that anything that is stablecoin is unacceptable?’ It’s always a big fear. “

Unlike Tether, the UST was not backed by a paper currency held in reserve. Instead, he relied on some sophisticated technique where price stability was maintained through the destruction and creation of the UST and its cognate token luna. Investors were attracted by the promise of 20% return on savings from Anchor, Terra’s flagship credit platform, a rate that many investors said was volatile.

Creator Terra Do Kwon has also amassed billions of dollars in bitcoin and other tokens through his Luna Foundation protection fund, but almost all funds have been exhausted in a futile effort to save UST.

However, the panic surrounding the UST has drawn attention to other stablecoins – notably Tether.

Regulators and economists have long questioned whether Tether has enough assets in its reserves to justify the alleged peg of the stablecoin to the dollar.

Earlier, the company claimed that Tether was backed by dollars to each other in a bank account, but later found that it used other assets including commercial paper – short-term corporate debt – and even digital tokens as collateral after the settlement with New York. Attorney General.

Last week, Tether said it had cut the amount of commercial paper it owned and increased its U.S. Treasury bond reserves. For the first time, the firm, based in the British Virgin Islands, said it also has some external public debt. Tether declined to comment on further sources of his funds, but said he was conducting a more thorough review of his reserves.

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