JAKARTA The US government plans to ban algorithmic stablecoins, cryptocurrencies whose prices are pegged to fiat and guaranteed with other company-owned crypto assets. In May the stablecoin algorithmic belonging to Teraform Labs, Terra USD (UST) fell more than 99 percent.
However, the plan is still in the proposed law that the US Financial Services Committee is discussing. Not only algorithmic stablecoins, but these rules will also tighten cryptocurrencies whose value is tied to overall fiat. Where stablecoins issued without financial institution approval will be banned.
The draft law in Congress requires The Federal Reserve System and state banking regulators to approve any stablecoin plans by non-bank entities before they can be legally published.
Later, stablecoin publishers approved by state regulators will have to register themselves with the Federal Reserve within 180 days to resume their operations legally.
In July, the stablecoin bill was postponed for more than a month due to changes suggested by Finance Minister Janet Yellen. He argues that the law should regulate the separation of customer assets from custodial wallets to preserve them in bankruptcy scenarios.
In June, Japan passed a similar bill acknowledging stablecoins as digital money that should be pegged to yen or other legal tender.
US Tighten Stablecoin Rules
The new stablecoins backed by assets created by the same publisher or "stablecoins guaranteed endogeneously" will not be allowed for at least the next two years. The current stablecoins will be required to change their business models and receive new approvals from the authorities within two years.
Stablecoins issued without approval from designated regulators would be illegal and would be sentenced to five years in prison and a fine of $1 million. The bill envisions such cryptocurrencies to be guaranteed with cash or highly liquid assets such as Treasury bonds.
The draft law aims to create a regulatory framework around stablecoins and asks the Federal Reserve to study the economic impacts of the US digital dollar (CBDC). It also mandates studies on algorithmic stablecoins by consulting with The Fed, Federal Deposit Insurance Corp, OCC, and Securities and Exchange Commission, as summarized from CryptoPotato.
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