The US Congress has proposed an annual ban on regular dual-block stablecoins like Terra USD Classic (USTC), which has precipitously collapsed, doing all the emergency tests.
The House of Representatives is debating a review of stablecoin regulation, although there is not enough time to work on the proposal as the midterm elections are just around the corner.
The latest version allows the creation or issuance of new stablecoins or endogenously backed stablecoins that assume the unique value of the associated cryptocurrency of the same developer to calculate parity with the dollar.
Until Terra’s spectacular crash in May of this year, its creators relied on a dual-stream mechanism, after which they minted Luna Classic (LUNC), the original discovery token under a new name, each time the stablecoin USTC Logic is trading below its parity of one dollar.
The US Congress is debating a review of stablecoin regulation
They entered a death spiral in mid-May and recorded almost zero in a matter of weeks, wiping out a fortune valued at more than $50 billion. This event prompted further scrutiny from regulators who believed that cryptocurrencies with shaky fundamentals had spread widely.
Previous versions of the stablecoin allocation requirements regulations honored a 1:1 liquidation reserve for stablecoins in circulation, and there were also some restrictions on the types of assets that could meet them.
The new project, according to Bloomberg, must be approved by the ranking member of the US Congress, Patrick McHenry, before the final version is published, which gives current stablecoin issuers, adhered by algorithms, a grace period of two years, to adjust their models and demand their tokens in a different way.
In addition to the moratorium on algorithmic stablecoins, the review also directs the US Department of the Treasury to conduct a study of Terra accessory offerings, in consultation with the Federal Reserve, Securities and Exchange Commission, and the Federal Currency Deposit Insurance Corporation.
Legislation for stablecoins is also of great importance to banks and they have abundant funds to finance or issue them. Majority-level regulators will also be included, giving non-bank stablecoin providers an expedited 180-day path to federal approval. Bloomberg notes that Waters and Patrick McHenry are already working toward a stablecoin review conference, so the committee could vote on legislation very soon.
George is Digismak’s reported cum editor with 13 years of experience in Journalism