Leaders of the House Financial Services Committee continue to negotiate the terms of a bill to regulate cryptocurrencyeven as the window for action shrinks further and further as the midterm elections approach.
According Bloombergthe latest bill would ban algorithmic stablecoins like TerraUSD (UST) for two years, while regulatory agencies would conduct a study of “guaranteed endogenous” tokens.
“Endogen” means something produced or synthesized within the organism or system. Before TerraUSD and Luna imploded in May, its creators relied on an algorithm to mint or burn Luna to keep the value of TerraUSD steady at $1.
More than $40 billion in value evaporated in a matter of days, and the meltdown became piece A in the crypto critic’s playbook, and intensified interest from lawmakers and regulators.
Previous versions of the bill required stablecoin issuers to maintain 1:1 liquid reserves for all stablecoins in circulation and would also limit the types of assets that could back them.
The latest project, which Bloomberg ratings currently sits with committee chair, Rep. Maxine Waters (D-CA), and may need to be reviewed by ranking member, Rep. Patrick McHenry (R-NC) — going one step further.
The stablecoin bill now offers banks and other financial institutions the ability to issue stablecoins, working with their existing network of regulators. But that network would now also include state-level regulators, giving state-approved stablecoin issuers a 180-day fast track to a federal green light.
The economic news service says the committee could put the bill to a vote as early as next week.
The stablecoin bill has been in the works for months and has been delayed in the past, in part because of concerns raised by Treasury Secretary Janet Yellen. Yellen repeatedly cited the collapse of TerraUSD when calling for greater regulation of the crypto space.
Likewise, Rep. Waters Underline risks of stablecoins earlier this year, stating that “surveys have shown that many of these so-called stablecoins are not, in fact, fully backed by reserve assets”, and that a lack of protection investors could even “threaten the financial stability of the United States”. “
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