Proposed Legislation: A New Step in Crypto Regulation
The United States House of Representatives is gearing up to introduce a draft bill that could shake the crypto world right down to its digital core. This proposed legislation seeks to implement a two-year ban on new algorithmic stablecoins, like the infamous TerraUSD Classic (USTC), after it unceremoniously disassociated itself from the U.S. dollar earlier this year, leading to some serious market chaos.
Caution in the Crypto Space: What the Bill Entails
As per the draft, the bill aims to criminalize the creation or issuance of new “endogenously collateralized stablecoins.” Essentially, if you’re thinking about starting your own stablecoin based on the value of another digital asset from your own brand, you might want to hold your horses—at least for the next two years. Fortunately for current providers, there’s a grace period, allowing them a little breathing room to alter their models and find a safer way to collateralize their digital nuggets.
What Counts as an Algorithmic Stablecoin?
Confusion abounds regarding which stablecoins would actually fall under this new definition. Any stablecoin that relies on the valuation of another coin from its creator to maintain its price—and markets itself with conversion or redemption promises—is at risk. For example, could Synthetix USD (SUSD) find itself in the firing line? As it happens, SUSD is collateralized with its own SNX token, which raises eyebrows among regulators.
The Nudge Towards Nuance
Crypto enthusiasts and experts often stress that Terra doesn’t encapsulate the entire stablecoin realm. Just take a look at Celsius, which was never really a DeFi platform, and 3AC, which had nothing but bad press without any real tech involvement. As Jake Chervinsky succinctly put it on Twitter, it’s far too easy to lump crypto into the “bad” category and call for sweeping regulations.
Regulatory Authorities Stepping In
Should this legislation move forward, the U.S. Treasury would take the lead in studying algorithmic stablecoins alongside the Federal Reserve and other key financial authorities. This could bring about a more structured approach to understanding how these currencies function within our larger economy.
What’s Next for the Bill?
Insiders suggest that the bill could face a panel vote as early as next week! Democratic Representative Maxine Waters and Republican Patrick McHenry are reportedly in talks to hash out the details. With the stakes so high, will they reach a consensus or will the road to regulation just hit a pothole?
Conclusion: The Future of Stablecoins?
The fallout from the USTC debacle highlighted how precarious the landscape of algorithmic stablecoins can be. While regulation could help stabilize the industry, it also risks stifling innovation. The next few months will be crucial in determining whether a balance can be struck between oversight and opportunity.
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