Bloomberg reports two-year moratorium on algorithmic stablecoins in the United States

A bill to regulate ‘stablecoins’, being developed in the U.S. House of Representatives, would impose a two-year ban on new algorithmic stablecoins similar to TerraUSD (UST). Bloomberg reports.

According to the agency, the measure would impose restrictions on coins not fully backed by cash or highly liquid assets. For existing projects, a grace period could be provided — over two years they must change their business models.

The bill would require the U.S. Treasury to conduct a study on algorithmic stablecoins. The Federal Reserve System (the Fed), OCC, the Federal Deposit Insurance Corporation (FDIC) and the Securities and Exchange Commission would participate in the consultations.

One of The Block’s sources noted that issuers of fiat-backed stablecoins would fall under the oversight of banking regulators and the Fed. Financial institutions would be able to issue their own ‘stablecoins’ under the supervision of the FDIC and the OCC.

According to the press, issuance without government approval could carry a prison term of up to five years and a fine of $1 million.

The current version of the bill is under discussion between the chair of the House Financial Services Committee, Maxine Waters, and Representative Patrick McHenry. The latter, according to sources, has not yet approved the bill.

Bloomberg’s sources said that a vote on the regulatory act could take place next week.

Waters is known for her scepticism toward cryptocurrencies. She has repeatedly expressed concerns about the Diem Association (the Libra Association) project.

In June 2019 the congresswoman urged Facebook to suspend development of the digital currency, and two months later unveiled a plan for its further study.

Later, Waters urged the Biden administration to revoke the OCC’s decisions regarding cryptocurrencies and stablecoins.

In April 2022, the head of the agency Michael Hsu urged to treat issuers of ‘stablecoins’ as depository institutions with insured deposits.

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