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Wednesday, September 28, 2022

Draft US Stablecoin Bill Would Ban New Algo Stablecoins For 2 Years

According to reports, in the new US Stablecoin Bill the law’s definition would include “endogenously collateralized stablecoins,” which depend on the value of an affixed cryptocurrency from the same originator to maintain a stable price.

New algorithmic stablecoins like TerraUSD Classic (USTC), which depegged from the U.S. dollar earlier this year and caused significant contagion in the cryptocurrency market, would be prohibited for two years under proposed legislation in the U.S. House of Representatives.

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According to a recent draught of the US Stablecoin Bill law seen by Bloomberg, the production or issue of new “endogenously collateralized stablecoins” would be illegal.

However, the US Stablecoin Bill gives existing algorithmic stablecoin suppliers a two-year grace period to alter their algorithms and collateralize their products.

The Draft US Stablecoin Bill Might Ban New Stablecoins Algo For A Couple Of Years: 

According to reports, the term would encompass stablecoins that are represented as having the potential to be converted, repurchased, or otherwise redeemed for a fixed price but instead depend on the value of another virtual asset from the same developer to maintain their price.

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The measure raises questions about whether stablecoins like Synthetix USD (SUSD), which is now collateralized with the native asset of the same protocol in the SNX token, will be included under the term. Similar-looking algo-stablecoins include BitUSD, which is supported by BitShares (BTS).

Along with researching algorithmic stablecoins and consulting with the Federal Reserve, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, the U.S. Treasury is required to comply with the proposed legislation.

Bloomberg reports that people familiar with the US Stablecoin bill say Democratic Representative Maxine Waters and Republican Patrick McHenry have been trying to agree on the legislation, though it’s unclear if McHenry approved the most recent draught. The panel may vote on the bill as early as next week.


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