Terra USD and other stablecoins could be banned in the US, with this law

A draft bill to regulate stablecoins in the United States would aim to ban the issuance of cryptocurrencies such as Terra USD (UST).

Create or issue “endogenously collateralized stablecoins”, would be illegal under one version of the law reported by Bloomberg.

With “endogenous guarantee” the document refers to the stablecoins that are solely dependent on another digital asset from the same creator to maintain its fixed price. This in the case of UST was fulfilled with the digital asset LUNA, also issued by the issuer of Terra.

Among other stablecoins similar to Terra is Decentralized USD (USDD) or “decentralized USD”, which is backed by the network’s native cryptocurrency, Tron (TRX). This is made possible by an algorithm that determines that in order to create USDD, you have to burn TRX.

In any case, the bill that is already in the House of Representatives of the Senate aims to avoid other cases such as algorithmic stablecoins that they lost their parity with the US dollar. Thus causing his collapse in a matter of days, generating millionaire losses around the world, last May, as reported by CriptoNoticias.

UST did not have collateral in fiat money or other cryptocurrencies. Its elastic supply is the only thing that was trying to keep its price stable. As well as trading its sister token LUNA.

The new bill proposes that stablecoins can be converted, redeemed or repurchased for a fixed amount of monetary valueand that they do not depend solely on the value of another digital asset of the same creator to maintain their fixed price, marking distance from failed projects such as UST.

Banks and non-banks could issue stablecoins

Another aspect on which the legislation focuses is on allow banks and non-banks to issue stablecoinsas long as it is approved by the regulatory entities.

The United States Federal Reserve (Fed) would be able to make decisions on requests for the issuance of stablecoins made by non-bank entities. If they have been approved at the state level and are registered with the Fed, they could operate under the bill.

On the other hand, the Bill Prohibits Stablecoin Issuing Companies From Mixing Customer Funds, stablecoins, private keys, and cash, with company assets. The objective of this measure is to protect users in cases of bankruptcy.

Evaluate the digital dollar

If the bill is approved, it gives the FED the role of study the impact that the issuance of the digital dollar would havea central bank digital currency (CBDC).

Among the points to be evaluated would be the effects that the CBDC would have on the financial system and the banking sector, as well as the privacy of Americans.

“We are running out of time in this Congress, but I am very hopeful that the Financial Services Committee can produce a stablecoin regulation bill,” said Representative Jim Himes to CoinDesk.

For the project to come to fruition, in principle it must be approved in the House of Representatives in plenary session and then it will go to the Senate where it must also be analyzed.

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