Leaders of the House Financial Services Committee continue to negotiate the terms of a proposed bill to regulate cryptocurrency, even as the window for action toward the midterm elections narrows.
according to BloombergThe Latest bill Algorithmic stablecoins like TerraUSD (UST) will be banned for two years while regulators are studying “internally backed” tokens.
The phrase “internally” means something that is produced or manufactured within an organism or system. Before TerraUSD and Luna exploded in May, its creators relied on a Luna mint or burn algorithm to keep the value of TerraUSD stable at $1.
More than $40 billion in value evaporated in a matter of days, and the crash became an example in a crypto critic’s guide, fueling the interest of lawmakers and regulators.
Previous versions of the bill required stablecoin issuers to maintain a 1:1 liquid reserve for all stablecoins in circulation and also limit the types of assets they could support.
Latest draft – which Bloomberg The notes are currently sitting with Committee Chairman Rep. Maxine Waters (D-CA), and may need to be reviewed by senior member Rep. Patrick McHenry (R-NC) — even more.
The stablecoin bill now provides a pathway for banks and other financial institutions to issue stablecoins, working with their existing network of regulators. But this network will now also include state regulators, providing state-approved stablecoin issuers with a 180-day fast track to obtaining the federal green light.
The Business News Service says the committee may put the bill to a vote as soon as next week.
The stablecoin bill has been in the works for months and has been delayed in the past, in part due to concerns raised by Treasury Secretary Janet Yellen. Yellen repeatedly cited the collapse of TerraUSD when she called for more regulation of the crypto space.
Likewise, Rep. Waters highlighted The risks of stablecoins earlier this year, saying, “Investigations have shown that many of these so-called stablecoins are not actually fully backed by reserve assets,” and that a lack of investor protection could “threaten the financial stability of the United States.”
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