'Failure Should Be an Option,' US Sen. Pat Toomey Says of UST Turmoil

The Banking Committee’s top Republican doesn’t want asset-backed stablecoins tarnished by the UST drama.

AccessTimeIconMay 11, 2022 at 8:51 p.m. UTC
Updated May 11, 2023 at 3:56 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Pat Toomey, the Senate Banking Committee’s senior Republican, said Wednesday algorithmic stablecoins may not pose a risk to the financial sector the same way fully reserved asset-backed stablecoins might.

The junior senator from Pennsylvania commented as the terraUSD (UST) stablecoin continued to languish far below the dollar peg it was designed to track.

"It does make sense that this episode with Terra would refocus attention on stablecoins generally,” Toomey told reporters on a conference call, but he defended tokens backed by assets such as cash and securities and said he doesn’t see them as a risk to the financial system, as suggested by U.S. regulators.

“And, by the way, failure should be an option,” Toomey said. “It’ll probably take some failures in this space in order for the market to figure out what works.”

Toomey, who last month pushed his own legislation for the future U.S. oversight of stablecoins, is serving out the remainder of his term before retiring in January. So he won’t be leading the committee if his party wins back the Senate majority after this year’s midterm elections.

In an exchange with U.S. Treasury Secretary Janet Yellen on Tuesday, Toomey similarly defended the broader stablecoin market by pointedly clarifying that UST was an algorithmic stablecoin not backed by the same kind of reserves that support other tokens.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Jesse Hamilton

Jesse Hamilton is CoinDesk's deputy managing editor for global policy and regulation. He doesn't hold any crypto.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.