Legislation to regulate stablecoins that’s being drafted in the House would place a two-year ban on coins similar to TerraUSD, the algorithmic stablecoin that collapsed earlier this year, Bloomberg News reported. Under the latest version of the bill, it would be illegal to issue or create new “endogenously collateralized stablecoins,” according to a copy obtained by Bloomberg. The definition would kick in for stablecoins marketed as being able to be converted, redeemed or repurchased for a fixed amount of monetary value, and that rely solely on the value of another digital asset from the same creator to maintain their fixed price. TerraUSD, also known as UST, was designed to maintain a 1-to-1 peg to the US dollar through an algorithm and trading in a sister token called Luna. That experiment failed spectacularly when UST crashed in May, resulting in billions of dollar of losses and prompting policymakers to take renewed interest in stablecoins. The draft legislation would mandate a study on Terra-like tokens from Treasury in consultation with the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., and the Securities and Exchange Commission. House Financial Services Committee Chairwoman Maxine Waters and Ranking Member Patrick McHenry have been working to reach an agreement on the stablecoin legislation, though people familiar with the discussions said it’s unclear if McHenry, a Republican, has approved the latest draft. Terms of the proposal could still change before a final version is released.
