Cryptocurrencies continue slide as regulators circle for stability

HONG KONG Reuters-Cryptocurrencies resumed their slide on Monday, giving up the gains they had eked out over the weekend, as regulators continued to circle.

On Monday, the price of cryptocurrencies fell 5% to around 29,700 in Asian trade, a move that was followed by stocks because of concerns about high inflation and rising interest rates.

The collapse of TerraUSD, a so-called stable coin, has roiled the world's largest coin, which has lost a fifth of its value this month, due to broad selling of risky investments.

According to price site coingecko, TerraUSD broke its 1: 1 peg to the dollar last week and is currently trading near 14 cents and is focused on stable coins and the important role they play in the criptocurrency system. Financial regulators have a lot of attention.

The Bank of France Governor Francois Villeroy de Galhau said on Monday that if they are not regulated and made interoperable in a consistent manner across jurisdictions, they could disrupt the international financial system.

He pointed out that stable coins, which were somewhat misnamed, were among the sources of risk.

Fabio Panetta, a member of the executive board of the European Central Bank, said on Monday that stablecoins were vulnerable to runs.

The world's largest stable coin, Tether, briefly lost its 1: 1 peg on May 12, before recovering. According to its operating company, Tether is backed by reserves in traditional assets, unlike TerraUSD.

On the same day, the price of digital currency dropped to $25,400, its lowest level since December 2020, but recovered to as high as $31,400 on Sunday.

The second-largest criptocurrency fell 5.6% to around $2,000 on Monday.

Regulators are also concerned. The U.S. Federal Reserve warned last week that stablecoins were vulnerable to investor runs because they were backed by assets that could lose value or become illiquid in times of market stress.