As the midterm elections get closer, the leaders of the House Financial Services Committee keep working on a bill to regulate cryptocurrency.
US Crack Down on Algorithmic Stablecoins
The term “endogenously” refers to anything that originates from inside an organism or a system. Before the May collapse of TerraUSD and Luna, the value of TerraUSD was kept at $1 by having its developers mint or burn Luna based on an algorithm.
The quick loss of almost $40 billion in value has become Exhibit A for people who don’t like cryptocurrencies and has gotten lawmakers and regulators interested.
Earlier drafts of the law would have limited the types of assets that could be used to back stablecoins and required developers to maintain 1:1 liquid reserves for all stablecoins in circulation.
US Draft Goes Even Further
Bloomberg reports that Rep. Maxine Waters (D-CA), who is overseeing the committee, is reviewing the recent draft, which may need to be examined by Rep. Patrick McHenry (R-NC), who is the ranking member.
A copy of the law was acquired by Bloomberg, and it states that issuing or creating new “endogenously collateralized stablecoins” is prohibited. This term refers to stablecoins that can be traded, redeemed, or bought back for a certain amount of money and whose price is kept stable by another digital asset from the same developer.
Media reports from Wednesday said that stablecoin developers who have been given permission by state authorities would need to register with the Federal Reserve within 180 days to be able to legally keep doing business.
A last-minute amendment proposed by Treasury Secretary Janet Yellen reportedly caused a delay of nearly a month for the stablecoin bill, as reported by CryptoPotato in July. In her view, the client’s assets should be kept separate from the wallet custodians in the event of insolvency.
In June, Japan approved a bill that was quite similar to this one, recognizing stablecoins as a kind of digital money that must be tied to the yen or another form of legal currency.