House bill

Internal bill could ban Terra-like stablecoins for two years: reports

By Chris Matthews

Bill appears to have bipartisan support from the financial services executive

A bipartisan bill gaining traction in the House could lead to a two-year moratorium on the issuance of so-called algorithmic stablecoins like TerraUSD, which exploded dramatically earlier this year and led to heavy losses for investors.

The bill is being crafted by Financial Services Committee Chair Maxine Waters, a California Democrat, with input from ranking Republican on the committee, Patrick McHenry of North Carolina, according to reports from Bloomberg and American Banker.

The bill would also require the Treasury Department, in conjunction with other financial regulators, to write a study on the threats and benefits of algorithmic stablecoins, Bloomberg reported.

Stablecoins are a type of cryptocurrency that aims to maintain a stable value against government-issued currencies like the US dollar. TerraUSD – also known as UST – is an algorithmic stablecoin, which has endeavored to maintain a one-to-one peg against the US dollar through an algorithm that controls the supply of an associated cryptocurrency called LUNA.

Algorithmic stablecoins differ from collateralized stablecoins which derive their value from collateral in non-crypto assets like the US dollar. Examples of secured stablecoins include Tether and USD Coin.

Terra’s collapse caught the attention of senior US politicians, including Treasury Secretary Janet Yellen, who said in May that the incident “illustrates that this is a rapidly growing commodity and that ‘there are risks to financial stability’.

Senator Pat Toomey of Pennsylvania, the ranking Republican on the Senate Banking Committee, suggested at the time that algorithmic stablecoins might be “inherently unstable.”

The news comes days after South Korean prosecutors asked Interpol to issue a fugitive alert for Do Kwon, the founder of Terra Transmitter Terraform Labs.

The Associated Press reported on Monday that Kwon’s whereabouts are unknown, although South Korean authorities believe he was recently in Singapore.

Kwon took to Twitter over the weekend to say he was “not on the run” and had “nothing to hide.”

-Chris Matthews

 

(END) Dow Jones Newswire

09-21-22 1029ET

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