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Draft US Crypto Bill Indicates Ban on New Algo Driven Stablecoins for 2yrs

Proposed bill in the US House of Representatives would impose a two-year prohibition on fresh algorithmic stablecoins, including TerraClassicUSD (USTC), which de-pegged from the US dollar a few months before, sparking significant cryptocurrency market panic. The law would make the development or issue of fresh “endogenously collateralized stablecoins” illegal, as per a Bloomberg-obtained copy of the bill.

Nevertheless, the regulation allows a two-year leeway for current algorithmic stablecoin suppliers to alter their methods and securitize their offerings in a new manner. According to reports, the term would include stablecoins whose price is maintained by the price of some other digital asset from the same inventor and which are advertised as having the potential to be exchanged, bought back, or indeed redeemed at a predetermined price.

The measure raises questions about whether stablecoins such as Synthetix USD (SUSD), which is now securitized with the native token of the same system (the SNX token), will fall within the term. Other comparable algo-stablecoins include BitUSD, which is supported by BitShares (BTS).

In addition, the proposed legislation requires the US Treasury to carry out a research of algorithmic stablecoins and engage with the US Federal Reserve, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.

Bloomberg news reported people familiar with the laws state Democratic Representative Maxine Waters and Republican Patrick McHenry have been working to attain a deal on the laws, albeit it is unclear if McHenry has endorsed the latest draft. The committee could vote on the bill as early as upcoming week.


McHenry is the Ranking Member of the House Financial Services Committee, which Waters chairs. On Tuesday, both Waters and McHenry heard evidence that U.S. dollar-pegged stablecoins might improve national security owing to the apparent dignity and dependability of the dollar.

TerraClassicUSD (USTC), originally known as TerraUSD (UST), is an algorithmic stablecoin that broke its 1:1 peg with the U.S. dollar at the start of May, resulting in losses of tens of milliards of dollars.

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