The U.S Intends to Ban Stable Coins Such As Tether-Terra- Luna – Is it true? 

According to Bloomberg, the latest proposed bill would Ban the use of algorithmic stable coins such as Terra USD (UST) for two years while regulatory agencies investigate “endogenously collateralized” tokens. 

 

Endogenously refers to something created or produced by an organism or system. Before Terra/USD and Luna crashed in May, its developers used an algorithm to mint or burn Luna to maintain Terra/Luna USD’s value at $1. 

In just a few days, more than $40 billion in value vanished, and the crash has increased attention among lawmakers and regulators while serving as Example in the crypto critics’ playbook. 

 

• The bill’s earlier versions limited the kinds of assets that might back stablecoins and mandated that stablecoin issuers keep 1:1 liquid reserves for all stablecoins in circulation.

•  The most recent proposal, which Bloomberg reports is currently being evaluated by committee ranking member Rep. Patrick McHenry (R-NC), and is currently being discussed with committee chair Rep. Maxine Waters (D-CA), goes even farther. 

 

Now that the Stable coin bill has been passed, banks and other financial institutions can issue stable coins in cooperation with their current network of regulators. But now that network would also involve state regulators, giving state-approved stable coin issuers a 180-day head start on gaining approval from the federal government. 

 

  A vote on the law might be taken as soon as next week, according to the business news service. 

 

Since months, the stable coins law has been in the works but has been postponed in the past, in part due to concerns voiced by Treasury Secretary Janet Yellen. When advocating for stronger regulation of the cryptocurrency industry, Yellen has regularly mentioned the collapse of the TerraUSD. 

 

Similar to how Rep. Waters did earlier this year, he emphasised the dangers of stablecoins, stating that “investigations have shown that many of these so-called stablecoins are, in fact, not fully backed by reserve assets” and that a lack of investor protections could even “threaten U.S. financial stability.”