Draft Bill To Ban Terra-Like Stablecoins For 2 Years To Be Put To Vote Next Week
- A House stablecoin bill inspired by the Terra implosion will put a blanket ban on the creation and distribution of blockchain-based stablecoins for a time period of two years.
- The USTC stablecoin had lost its peg months ago and still hasn’t been able to retain it has been the driving force of the draft bill.
- The draft bill, if passed, will also madate a study into the UST stablecoin (now USTC) since it was one of the biggest financial disasters in the history of the crypto world.
A draft bill to put a blanket ban on stablecoins based on algorithms like UST (now USTC or TerraUSDClassic) will be put to vote as early as next week. However, the ban will last only for two years until the government successfully regulates the industry after conducting a deeper study of these algo-stablecoins.
According to a report from Bloomberg, the House draft bill, if passed and approved, will turn the minting and trading of such stablecoins into an illicit activitiy and the people involved might face jail time or penalties as well.
The creation of “endogenously collateralized stablecoins” will be completely banned, reads the bill which was obtained by Bloomberg. Interestingly, while the USTC stablecoin had lost its peg months ago and still hasn’t been able to retain it, there are multiple stablecoins that currently follow almost the same model and might also fall apart in the near future as per the government.
Hence, it becomes crucial to regulate such blockchain-based currencies. The biggest of these blockchain-based tokens that might be affected due to the draft bill are Tron’s USDD and Near Protocol’s USN. The two stablecoins were created recently by the respective DeFi projects and provider around 30% and 10% yields to their holders as well.
The draft bill, if passed, will also madate a study into the UST stablecoin (now USTC) since it was one of the biggest financial disasters in the history of the crypto world. The study will be implemented with the Federal Reserve, the Office of the Comptroller of Currency, Federal Deposit Insurance Corp. and the Securities and Exchange Commission acting as consultants.
House Financial Services Committee Chairwoman Maxine Waters and Ranking Member Patrick McHenry are currently working to finish up the draft and achieve a common ground prior to the voting of the bill which is expected to happen as soon as next week.
As per the people fimilar with the matter, if the latest draft has been approved by McHenry, a Democrat, remains unclear. Moreover, the markup date hasn’t been decided as well.
Algorithmi stablecoins are those blockchain-based assets which are backed by cryptocurrencies and are subject to volatility if they are not implemented carefully. They can be backed by a basket of assets including Bitcoin or native tokens. For exchange, Tron’s USDD is backed by the two biggest stablecoins by market cap, USDT and USDC. It is also backed by Bitcoin and TRX, Tron’s native token.
The stakers and holders of USDD get around 30% yield on their holdings while UST (now USTC) provided 20% while USN provides 10%. However, these yields are not sustainable and can fall apart at any time.