The fall of Terra was an eye-opener for many. The “algorithmic” generation of crypto assets has been equated to creating money out of magic, and people’s faith in Stablecoins with no backing from a real asset is on a decline. A House Stablecoin bill is on the horizon as the word is that it includes banning such cryptocurrencies – Terra LUNA Price has dropped in its response.
The Terra LUNA trading candles are a little green today, but their height suggests they can change colors any minute since the accumulation signals a lack of interest from the customer’s side.
Things Aren’t Looking Good for Stablecoins
Bloomberg’s reporters were able to get a copy of the Stablecoin bill. It states that the House is in the process of drafting a Stablecoin bill that would impose a two-year ban on cryptocurrencies like TerraUSD, the algorithmic Stablecoin that collapsed and almost took the entire market with it.
If that bill comes to pass, issuing or creating “endogenously collateralized Stablecoins” that rely on the value of another digital asset would be considered a crime.
It is to note that unlike traditional Stablecoins like USDC, algorithmic Stablecoins such as TerraUSD have come under fire because their value depends upon another volatile asset. USDC, on the other hand, is backed by cash and short-dated US treasuries. The same goes for USDT (TetherUSD), which is 100% supported by its reserves.
Security Exchange Commission to Also Come around to Look into these Assets
It is not just the House that algorithmic Stablecoins have to contend with. Security Exchange Commission, the US Treasury Department, and other regulatory bodies are also readying their pitchforks against algorithmic Stablecoins.
The cryptocurrency crowd should be a bit worried because most regulatory bodies have not been kind towards crypto. The current battle between SEC and Ripple is proof of that.
That said, the audience shouldn’t worry about anything as of yet. The House bill has not been finalized yet and will likely undergo many changes. Some of the key points regarding algorithmic Stablecoins will likely stay.
The Block writes that the bill also sets forth certain rules for general Stablecoins.
Issuing a Stablecoin without approval from the regulators by up to five years in prison and a $1 million file.
The bill is still under negotiations between Patrick McHenry and Maxine Walters. The final signature is yet to be put on the bill.
Crypto Twitter Reactions to this Development
The crypto reactions to this ban range from indifferent to bullish. These reactions come as a surprise to many who have always thought the crypto sphere has always yearned for less oversight.
But there are also users who are complaining that the bans are way too long.
A two year ban?
That's so long
— Greattobi |SUMATI WORLD (@Greattobi1) September 21, 2022
Other crypto Twitter channels have started calling out to their followers to stack USDC, marking it as the safest Stablecoin in the world.
Time to stack some #USDC, the safest #StableCoin in the world!
Subscribe with your email and grab free $USDC every hour! 🔗https://t.co/q7R5GHcYHr
Simple as that.#CTBot Adrop Ram 0.0000001 USDT-TRC20 20 pic.twitter.com/lHpSHqhhSf
— cryptosamy (@cryptosamy1) September 22, 2022
Terra Classic Price Drops
Terra went through many rallies last month, defying market fundamentals and necessarily all the odds. However, it seems like the rally has slowed down. While it peaked at $0.00058 a couple of weeks ago, the Terra Classic price has now corrected to $0.00028. It is not known whether the current market fundamentals are to blame for this situation or if the crypto crowd has finally come to its senses.
Regulations Mean Long-Term Bullishness for Crypto–Experts
Many crypto commentators have come around to state that the rising calls for regulations would only be good for the crypto market in the long term. Introducing new measures will only stabilize the currently volatile crypto market, which will work toward instilling public confidence in crypto.
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