US House of Representatives Releases Draft Bill Proposing Ban on Algorithmic Stablecoins

The U.S. House of Representatives Financial Services Committee has Announce A draft stablecoin bill that proposes a ban on stablecoins backed by other cryptocurrencies and calls for research into central bank digital currencies (CBDCs). The bill marks the first significant piece of crypto legislation to be passed in 2023 after two major incidents involving stablecoins in the past year.

The draft legislation, available on the committee’s hearings page, seeks to create definitions for issuers of stablecoins that pay, echoing former Sen. Pat Toomey (R-Pa.) when he introduced his own stablecoin bill in 2022. A term coined. The ban on stablecoins, such as TerraUSD (UST), backed by tokens like LUNA, will remain in place until research is done on the topic. The bill also calls for a study of the potential impact of a CBDC issued by the Federal Reserve (Fed).

Punchbowl News first reported the release of the bill, which has been circulating among lawmakers since last fall. However, it was not previously shared with the public. The House Financial Services Subcommittee will hold a hearing on stablecoins next Wednesday featuring Dante Disparte from USDC issuer Circle Internet Financial; Jake Chervinsky from the Blockchain Association; Columbia University professor Austin Campbell and director of the New York Department of Financial Services Adrienne Harris.

The hearing will come a day after the full Financial Services Committee met to hear from Securities and Exchange Commission (SEC) Chairman Gary Gensler. A spokesman for committee chairman Rep. Patrick McHenry (R-N.C.) said it was no surprise the bill was posted on the website.

Stablecoins, whose value is pegged to an underlying asset such as the U.S. dollar or other cryptocurrencies, have grown in popularity in recent years. However, they face scrutiny due to the potential for them to destabilize the financial system if their value suddenly drops or their underlying assets become worthless.

Since the U.S. plays an important role in the global crypto market, the proposed bill could be of interest to cryptocurrency investors and policymakers around the world. If passed, the bill would have a significant impact on the industry and could serve as a model for other countries considering their own stablecoin regulations.

In conclusion, the release of the stablecoin bill by the U.S. House of Representatives Financial Services Committee represents an important step in the regulation of the crypto industry. The ban on stablecoins and the proposed CBDC research could have a profound impact on the industry, and the outcome of the hearings in the coming days will be interesting.

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