- The draft stablecoin regulation appears to ban algorithmic stablecoins.
- Strict regulation that must be followed for both bank and non-bank issued stablecoins.
A draft US House of Representatives stablecoin regulation appears to ban algorithmic stablecoins for two years, according to a draft received by Bloomberg. A vote is expected in the coming weeks and the result is somewhat predictable.
The Financial Services House conducted a study on “internally secured stablecoins”. The term gives the meaning of currencies that are not tied to any fiat assets and have a completely different mechanism of growth and increase in value.
One example of an internal collateral stablecoin is TerraClassicUSD (USTC). The token is algorithmic and jointly based on its sister currency TerraClassic (LUNC). On May 22, the token experienced a sharp decline with a loss of $40 billion, with an ATL of $0.006218.
Stablecoin Regulation Draft
Ms Maxine Waters and ratings member Patrick McHenry of the US House of Representatives Financial Services Committee chaired the drafting committee to establish strict regulations on both bank-issued and non-banking stablecoins.
The draft also contains guidelines for the mandatory study of algorithmic stablecoins by the US Treasury and the Federal Reserve. With the inclusion of other important government bodies such as the Securities and Exchange Commission, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation.
Banks wishing to issue a stablecoin must obtain approval from the OCC. Likewise, non-banks are required to meet the Federal Reserve’s criteria after obtaining statewide approval within 180 days.
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