European officials reiterated warnings of risks posed by
cryptocurrencies.
Bitcoin fell 5 percent to around $29,700 on Monday in Asian
trade, sliding alongside stocks because of worries about high inflation and
rising interest rates.
The world's largest cryptocurrency has lost around one fifth
of its value so far this month, as the spectacular collapse of TerraUSD, a
so-called stablecoin, has roiled cryptocurrency markets already falling amid
broad selling of risky investments.
TerraUSD, which broke its 1:1 peg to the dollar last week
and is currently trading near 14 cents, according to price site coingecko, has
drawn particular attention to stablecoins and the important role they play in
the crypto system. Some of that attention has come from financial regulators.
Bank of France Governor Francois Villeroy de Galhau told a
conference on Monday that crypto assets could disrupt the international
financial system if they were not regulated and made interoperable in a consistent
and appropriate manner across jurisdictions.
He pointed to stablecoins, which he said were somewhat
misnamed, as among the sources of risk.
Speaking separately, Fabio Panetta, member of the executive
board of the European Central Bank, also said on Monday that stablecoins were
vulnerable to runs.
Tether, the world's largest stablecoin, briefly lost its 1:1
peg on May 12, before recovering. Unlike TerraUSD, Tether is backed by reserves
in traditional assets, according to its operating company.
On the same day, bitcoin dropped as far as $25,400, its
lowest level since December 2020, but recovered to as high as $31,400 on
Sunday.
Ether, the second-largest cryptocurrency, fell 5.6 percent
to around $2,000 on Monday.
Regulators elsewhere are also concerned. The US 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. © Reuters
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