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Terra to purchase $10 billion of Bitcoin to support UST stablecoin

Terra plans to buy and hold up to $10 billion worth of Bitcoin, a massive haul of the flagship cryptocurrency that Terraform Labs says will be used to back the stablecoin TerraUSD (UST). Instead of Terra having cash reserves or other cash equivalents it plans to keep enough BTC to cover all the UST currently…

Terra plans to buy and hold up to $10 billion worth of Bitcoin, a massive haul of the flagship cryptocurrency that Terraform Labs says will be used to back the stablecoin TerraUSD (UST).

Instead of Terra having cash reserves or other cash equivalents it plans to keep enough BTC to cover all the UST currently in circulation.

That, essentially, is the main script around Terra’s plan to purchase BTC worth up to $10 billion. CNBC ran a commentary on Terra early Tuesday.

Terra’s UST Plans Add to Bitcoin Demand

Do Kwon, founder and CEO of Terraform Labs, announced Monday that they had purchased $135 millions worth of BTC. This brings their total Bitcoin purchases for 2022 up to $1 billion.

In an earlier comment about the decision to buy as many Bitcoins, Kwon stated:

UST with $10B+ in BTC reserves will open a new monetary era of the Bitcoin standard. P2P electronic cash that is easier to spend and more attractive to hold Bitcoin

UST is similar to other stablecoins. It is tied 1:1 to the US Dollar and keeps its value stable even in extreme volatility. This stablecoin is looking to change from being an algorithmic, decentralised currency that was backed with cash reserves to one that is backed up by Bitcoin.

And this is a story that has pushed Bitcoin higher in the past few days. It was an aggressive accumulation of whales. Bitcoin jumped to highs above $48,000 on Monday, bringing its 30-day gains to over 20% and pushing its value into positive territory year-to-date.

Terra’s huge LUNA also saw big gains, moving from around $90 to hitting highs above $106. this week. Meanwhile, UST’s market cap rose to over $16 billion to make it the 14th largest crypto project.

Regulatory attention?

A CNBC report about Terra’s big bet in Bitcoin and UST states that some analysts warn this might not go down well with US regulators. This is because regulators previously raised concerns about stablecoins’ potential risks to the financial sector.

While Janet Yellen, Treasury Secretary, recently stated that the US would seek to create a regulatory framework to support crypto innovation in the US, there are still concerns about stablecoins.

The SEC subpoenaed Terraform Labs’ CEO Do Kwon and Terraform Labs, in 2021, amid allegations of US law violations. Kwon sued SEC again, and earlier in the year, a US court ordered Terra comply with subpoenas.

Could UST draw more attention right now? According to CNBC analysts, it could, with any possible developments coming even though lawmakers seek to accelerate the development of a virtual dollar.

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