Even as time runs out before the midterm elections, members of the House Financial Services Committee are still working out the details of a proposed plan to regulate cryptocurrencies. According to the draft bill, the U.S. government says creating and issuing “endogenously collateralized stablecoins” would be illegal. 2 Years Ban on Terra-Like Stablecoins It should be highlighted, nevertheless, that current service providers have two years to improve their business models by selecting new strategies to collateralize their products. Even though Terra’s catastrophic fall occurred months ago, its aftershocks are still felt today. The U.S. Treasury is required to abide by the proposed legislation, along with dedicated research on algorithmic stablecoins and consultation with the Federal Reserve, the Securities and Exchange Commission (SEC), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC). Stablecoins in Circulation Previous drafts of the legislation limited the types of assets that may be used to back stablecoins and mandated that stablecoin issuers keep 1:1 liquid reserves for all stablecoins in circulation. With the help of their current network of regulators, banks and other financial institutions can issue stablecoins thanks to the stablecoin bill. However, that network would now also include state regulators, giving stablecoin issuers with state approval a 180-day fast...
