Crypto Stablecoin Plummet Sparks Call for Banks to Keep Distance

The recent collapse of the TerraUSD stablecoin forces policymakers to rethink just how close they want other stablecoins to get to the federally insured banking system.

Lawmakers and other officials have been calling for increased regulation of stablecoins since TerraUSD lost its peg to the dollar and cost investors billions of dollars. The Biden administration last year floated the idea of requiring stablecoins backed by fiat currency to be issued only by federally insured banks.

But the collapse of TerraUSD, an algorithmic stablecoin not backed by reserves of fiat currencies or other tangible assets, puts the question of allowing any ...