Terra (LUNA) Disaster: US Declares War on Algorithmic Stablecoins

Something finished! – It was learned that the Fed wanted to accelerate the legislation on stablecoins to protect some financial stability. Today, we learned that the US House of Representatives wants to pass a bill to ban algorithmic stablecoins. This law could be passed as soon as next week.

Algorithmic stablecoin ban, consequence of Terra USD crash

Bloomberg has published September 20, 2002 the intentions of the House of Representatives against the tokens indexed in a fiat currency. In fact, the latter prepares a bill to ban algorithmic stablecoins. This text, which would be in force for two years, would prohibit currencies similar to Terra USD. “Stable” currency whose recent decline caused the market to crash.

As one more reminder that value of 40 billion dollars disappeared in a few days due to the consequences of this fall. Since then, this crisis has been a real evidence for critics of cryptocurrencies. In addition, 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 collateralized stablecoins”.

The Capitol where the House of Representatives is located
The Capitol where the House of Representatives is located

This definition applies:

  • to stablecoins marketed as capable of being converted, redeemed or redeemed for a fixed amount of monetary value;
  • and that depend solely on the value of another digital asset from the same creator to keep the price.

The word “endogenous” represents something produced, created, synthesized within the organism of a system. On the contrary, we speak of exogenous for something created outside the system. For example, the creators of UST used a moon-minting or moon-burning algorithm to keep the value of Terra USD stable at $1.

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A crypto bill that could still be rejected

The bill provides for the Treasury to conduct studies on algorithmic stablecoins with the help of the Fed and other US institutions. However the the terms of the final proposal could still change. In fact, people close to the discussions expressed doubts about the deal McHenrythe Republican Party economic leader. McHenry reportedly tried to strike a deal with the Maxine Waters, Chair of the House Financial Services Committee.

US Federal Reserve logo
US Federal Reserve logo

The bill also seeks to allow banks and non-banks to issue stablecoins. Therefore, issuers must seek approval from the usual regulator. Therefore, the legislation 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 letter of non-bank issuers approved by the state and then apply to the FED within 180 days of said approval.

Therefore, the United States seems to be making progress in regulating cryptocurrencies and differentiating the types of stablecoins. On the other hand, in the old continent, some have doubts on the correction of the bill.

Right now, it’s a silly waltz for stablecoins! Conspired by the authorities, overthrown by certain exchanges, where will it stop? Fortunately, there are still cryptos, the real ones. Do you want to fill? Sign up without delay on the FTX referral platform. In addition, you benefit from a return of 8% on all your digital assets (commercial link, see conditions on the official website).

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