WASHINGTON—The most recent version of a changing House bill regulating stablecoins would place a two-year ban on dollar-pegged digital assets like TerraUSD, which collapsed in a $48 billion bank run-style panic in May, according to a new analysis.
“Despite being widely considered a priority in both houses of Congress, repeated attempts to overcome partisan differences over state versus federal regulation and whether nonbank institutions would be allowed to issue stablecoins have failed over the past few months,” Pymnts.com reported.
The current bill being negotiated by the House Financial Services Committee’s chairwoman Maxine Waters (D-CA) and its ranking minority member Patrick McHenry (R-NC) would effectively ban any token not 100% backed by a reserve of dollars or highly liquid securities like short-term treasury bills.
The TerraUSD algorithmic stablecoin’s value was supported by an arbitrage mechanism with another cryptocurrency token, LUNA, that failed. This and similar stabilization mechanisms would be the subject of the moratorium, which would make it illegal to create or issue one, Bloomberg reported. Others, like No. 4 stablecoin Dai, with $6.9 billion in tokens circulating, are backed by reserves of other cryptocurrencies.
The Specifics
More specifically, the ban would be on “stablecoins marketed as being able to be converted, redeemed or repurchased for a fixed amount of monetary value, and that rely solely on the value of another digital asset from the same creator to maintain their fixed price,” the Bloomberg report stated.
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