Pat Toomey, the ranking Republican on the Senate Banking Committee, said Wednesday that algorithmic stablecoins may not pose the same risk to the financial sector as fully reserved asset-backed stablecoins, as TerraUSD (UST) remains far below the dollar rate it is supposed to track.
"It makes sense that this episode with Terra is drawing attention to stablecoins in general," Toomey told reporters on a conference call, but he defended tokens backed by assets such as cash and securities, saying he doesn't see them as a risk to the financial system as U.S. regulators have claimed.
"And by the way, failure should be an option," Toomey said. "There will probably have to be some failures in this area for the market to figure out what works."
Toomey, a Pennsylvania lawmaker who last month advanced his own legislation for future U.S. oversight of stablecoins, is serving out the remainder of his term before retiring in January. So he won't be heading the committee if his party wins back a majority in the Senate in this year's midterm elections.
In an exchange with U.S. Treasury Secretary Janet Yellen on Tuesday, Toomey similarly defended the broader stablecoin market, clarifying that UST is an algorithmic stablecoin that is not backed by the same kind of reserves that support other tokens.