By Mark Ackman
The United States has recorded increasing interest in cryptocurrencies in the last few years. During 2020 and 2021, interest in the market skyrocketed due to the bull run and all-time high values were recorded.
It is because of the rising traffic in the market that regulatory authorities in the United States have also found themselves under pressure to develop regulations for the crypto space.
Lawmakers part of the HSFC (House Financial Services Committee) are now discussing the terms and conditions of a new proposed bill for the crypto bill.
They have had to accelerate their efforts of late as they have a narrow window to act since mid-term elections are approaching fast.
New bill
The latest draft of the crypto bill in question is worth looking at because if it is approved, it would mean a complete ban on algorithmic stablecoins like the TerraUSD (UST).
According to the terms of the bill, a two-year ban should be introduced for these stablecoins, as regulators will use this time to do a study on the ‘endogenously collateralized’ cryptocurrencies.
‘Endogenously’ is a term that defines something produced within a system or organism and it is suitable for algorithmic stablecoins like TerraUSD (UST) because its creators depended on an algorithm that minted and burned LUNA tokens for maintaining its value.
The value of the stablecoin was always supposed to be $1 and the algorithm would react to price changes for keeping the balance.
The risk
In May 2022, the crypto market was taken by a storm when the TerraUSD stablecoin and the LUNA token both imploded and this resulted in negative consequences for all participants.
Those who had invested in the stablecoin and the sister crypto suffered massive amounts of losses, as both of them became nearly worthless.
Moreover, the event also ended up launching a bearish trend in the crypto market, which saw prices of almost all cryptocurrencies go down.
This gave crypto skeptics yet another look into just how risky the market is and this has put regulators and lawmakers under more pressure.
It made it apparent that regulations are required for providing consumer protection in the crypto market, which resulted in the proposed bill in question.
The final vote
Other bills had also been proposed previously related to stablecoin issuers, which required them to have liquid reserves for the stablecoins in circulation.
In addition, they also highlighted the assets that could be used for backing the stablecoins. The new draft, on the other hand, is a very in-depth one.
It also comprises instructions and regulations that financial institutions would have to follow if they want to issue stablecoins.
A network of regulators would collaborate with them and this would comprise state-level regulatory bodies as well.
Moreover, stablecoin issuers would also need to obtain federal approval before they can take their projects forward and they will have 180 days to do so.
The vote for the bill is scheduled for the next week and then it will be decided if it is passed into law or not.