The bill in the US House of Representatives would impose a two-year ban on new algorithmic stablecoins like TerraUSD Classic (USTC), which de-pegged from the US dollar earlier this year, sparking widespread contagion. of the crypto market.
The bill would criminalize the creation or issuance of new “endogenously collateralized stablecoins,” according to a current draft of the legislation obtained by Bloomberg.
However, the legislation includes a two-year grace period for existing algorithmic stablecoin providers to change their models and collateralize their offerings differently.
The definition would reportedly cover stablecoins that rely on the value of another virtual asset from the same creator to maintain their price and are traded as having the ability to be converted, repurchased, or otherwise redeemed for a fixed price.
The invoice increases concerns about whether stablecoins like Synthetix USD (SUSD) would fall under the definition, as it is currently collateralized with the native asset of the same protocol in the SNX token. Other algo-stablecoins with a similar structure include BitUSD, which is backed by BitShares (BTS).
Those who are well educated in crypto understand that Terra does not represent all stablecoins, Celsius was not DeFi, 3AC had nothing to do with technology, etc.
But as in all things, it is much more difficult to get involved with those nuances than to simply say “bad cryptocurrencies, regulate them ad nauseam”.
—Jake Chervinsky (@jchervinsky) September 19, 2022
The bill also requires the US Treasury to conduct a study on algorithmic stablecoins and consult with the Federal Reserve, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the coin.
The panel may be able to vote on the bill as soon as next week, as Bloomberg reports that people familiar with the state legislation, Democratic Rep. Maxine Waters and Republican Patrick McHenry, have been working to reach an agreement on the legislation, though it is unknown if McHenry signed the law. latest draft.
Related: The crypto industry can trust Cynthia Lummis to get the regulation right
Waters chairs the House Financial Services Committee, of which McHenry is a ranking member, both heard testimony at a hearing Tuesday that USD-backed stablecoins could enhance national security due to the dollar’s perceived prestige and reliability. .
USTC, formerly known as TerraUSD (UST), is an algorithmic stablecoin that lost its 1:1 peg to the USD in early May, hitting an all-time low of $0.006 in mid-June, resulting in tens worth of losses. of billions of dollars.