- Draft for regulating stablecoins is seemingly to ban algorithmic stablecoins.
- Strict regulation to follow for both banking and non-banking issued stablecoins.
U.S House of Representative draft for stablecoins regulation is seemingly to ban algorithmic stablecoins for two years, as per the draft received by Bloomberg. The voting is expected to be carried out in the upcoming weeks and the result is more or less predictable.
The House Financial Services has conducted a study on the “endogenously collateralized stablecoins”. The term gives away the meaning, of coins which are not been pegged to any fiat assets and have a completely different mechanism for growth and value increase.
One such example of the endogenous collateral stablecoin is the TerraClassicUSD (USTC). The token is algorithmic and is co-dependent on its sister coin TerraClassic (LUNC). On May 22, the token had a drastic fall with a loss of $40 B, attaining its ATL of $0.006218.
Draft for Stablecoin Regulation
Chairwomen Maxine Waters and Ranking Member Patrick McHenry, of the U.S. House Committee on Financial Services, head the drafting committee to put on strict regulation over both banking and non-banking issued stablecoins.
The draft also has guidelines for the obligatory study of the algorithmic stablecoins through the U.S. Treasury and the Federal Reserve. With the inclusion of other significant government bodies such as the SEC, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation.
The banks who wish to issue stablecoin should get approval from the OCC. Similarly, the non-banks have to meet the Fed’s standards after getting state-level approval within 180-days periods.
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