The House Financial Services Committee in the U.S. continues to negotiate new crypto legislation with big employers. Even now, with the mid-term elections approaching, time has passed. According to Bloomberg The latest version includes a ban on algorithmic stablecoins like TerraUSD (UST).
What is going on?
In May, the Terra protocol, UST stablecoin and LUNA token associated with the project completely collapsed. With that decline, $40 billion was lost in value. This has raised a lot of concerns for regulators and is influencing future laws and regulations in the United States. At the time of writing, the latest version of the new crypto law includes a temporary ban on algorithmic stablecoins.
The idea is to ban stablecoins like Terra for two years while the lawmakers behind it begin an investigation into this form. Fixed Currencies. Terrara is a so-called “endogenous” stablecoin. That is, it produces something in its own system. Before the explosion in May, Terra relied on an algorithm that rotated or burned Luna to keep the value of the USD stable.
The future for stablecoins
The new US law paves the way for banks and other financial institutions to bring their own stablecoins to market. They are authorized by the Act to do so in conjunction with the existing network of regulators. However, that network should also include state-level regulators. In that case, these parties can place a fixed currency on the market within 180 days.
Bloomberg says the committee plans to vote on the new proposal next week. Stablecoin legislation has been in the pipeline for months and has been delayed several times in the past. The reason for this is the skepticism of Treasury watchdog Janet Yellen. He has more than once cited Terra’s collapse as the basis for new regulations in the crypto industry.
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