The collapse of the Terra ecosystem has shaken the crypto market, raising fears and scrutiny from policymakers.
Anyone who is even marginally familiar with cryptocurrencies is aware of the steep decline of Terra’s native assets LUNA and UST.
The ruthless descent that both of these assets took to zero was watched by the entire world, and it has piqued the curiosity of regulators, who have begun to scrutinize the stablecoin industry.
The de-pegging of UST was taken all the way to a plenary sitting of the National Assembly’s Political Affairs Committee. During the meeting, Rep. Yoon Chang-hyeon, a member of the ruling party, requested the government to bring Do Kwon in for questioning, citing the damage the network had caused to multiple individuals.
The hearing invitation comes after the company submitted yet another proposal to revive its faltering Terra blockchain by removing the failed TerraUSD stablecoin and reimagining the project as a new network.
In a post on a research forum, Kwon stated that he plans to clone the blockchain’s code to construct a new network named Terra and issue new tokens to former Terra supporters such as key app developers, individuals whose computers order transactions on the network, and those who still own TerraUSD.
UST and LUNA were designed to work together, with the former being held at $1 by a burn mechanism that encouraged traders to exploit arbitrage opportunities. Capital fled as the network’s fundamental use case declined, resulting in a death spiral.
LUNA’s price plummeted by nearly 100% in a couple of days as the stablecoin it backs, UST, slid from a $1 peg. LUNA is now worth a fraction of a penny, whereas UST is now worth $0.13 per dollar.
Many national representatives, not only from Korea, have organized meetings to analyze the situation and come up with solutions to protect their investors, including a number of regulators who became weary of the harm Terra had created and began to look into the entire stablecoin market.