TERRA disaster: US declares war on algorithmic stablecoins
Algo, finished! – It was known that the FED wanted to accelerate the legislation on stablecoins to protect a certain financial stability. Today, we learn that the US House of Representatives wants to pass a bill to ban algorithmic stablecoins. This law could be passed as early as next week.
Prohibition of algorithmic stablecoins, consequence of the fall of the Terra USD
Bloomberg has published September 20, 2002 the intentions of the House of Representatives against tokens indexed on a fiat currency. Indeed, the latter prepares a bill to ban algorithmic stablecoins. This text, which would remain in force for two years, would prohibit currencies similar to Terra USD. “Stable” currency whose recent fall caused the market to collapse.
As a reminder more than 40 billion dollars worth disappeared in a few days from the consequences of this fall. Since then, this crisis has been a real piece of evidence for critics of cryptocurrencies. Moreover, it has intensified the interest of legislators and regulators on the subject.
The latest version of the bill wants to make it illegal to broadcast or create news “endogenously guaranteed stable currencies”.
This definition applies:
- to stablecoins marketed as being able to be converted, redeemed or redeemed for a fixed amount of monetary value;
- and which depend solely on the value of another digital asset from the same creator to maintain the price.
The word “endogenous” represents something produced, created, synthesized within the organism of a system. Conversely, we speak of exogenous for something created outside the system. For example, the creators of UST used an algorithm that minted or burned luna to keep the value of Terra USD steady at $1.
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A crypto bill that could still be rejected
The bill provides for the Treasury to carry out studies on algorithmic stablecoins with the help of the FED, and other American institutions. However, the terms of the final proposal could still change. Indeed, people close to the discussions reportedly expressed their doubts about the agreement of McHenrythe Republican Party Economic Leader. McHenry reportedly tried to reach an agreement with the House Financial Services Committee Chair Maxine Waters.
The bill also aims to allow banks and non-banks to issue stablecoins. Issuers should therefore seek approval from the usual regulator. The legislation therefore requires the help of the FED to establish a decision-making process for requests from non-bank issuers.
State regulators will also have a role to play. They will be able to operate under the bill non-bank issuers approved by the state and then applying to the FED within 180 days of that approval.
The United States therefore seems to be advancing in the regulation of cryptocurrencies and differentiating the types of stablecoins. On the other hand, on the old continent, some have doubts on the correctness of draft legislation.
Right now, it’s a lame waltz for stablecoins! Conspired by the authorities, ousted by certain exchanges. Where will it stop? Fortunately there are still the cryptos, the real ones. Want to fill up? Register without delay on the FTX reference platform. In addition, you benefit from an 8% return on all your digital assets (commercial link, see conditions on official website).