Proposed ban on algorithmic stablecoins
Stablecoin legislation being drafted in the House would introduce a two-year ban on cryptocurrencies similar to TerraUSD, the algorithmic stablecoin that collapsed in early 2022.
It is illegal to issue or create stablecoins collateralized by the value of another digital asset from the same creator to maintain a fixed price.
The investigation into terra tokens and similar crypto assets is expected to be conducted by the Treasury, Federal Reserve, SEC, and other regulators.
Whelp, was nice knowing you guys. https://t.co/sb83YlBCmh
— King Ko₿ra🐍 (@kobratrading) September 20, 2022
Earlier this week, Terra Classic (LUNC) was up 15%, trading at a high of $0.00032 while the cryptocurrency market sold off ahead of the FOMC meeting on The 20th September.
LUNC prices have now halved that gain, and LUNA prices are in the red this week, down 2-3%.
TerraClassicUSD price drops
TerraUSD, now rebranded to TerraClassicUSD (USTC) has been hit harder, selling nearly 5% in the past 24 hours.
Tether is backed by cash reserves and was not affected by the UST and LUNA incidents in May 2022.
There was no way in hell algo stables weren't getting the federal treatment.
Not surprised at all.
— CryptoISO (@crypto_iso) September 20, 2022
Some market commentators have argued that stablecoin regulation by governments in the long term will be a bullish catalyst for cryptocurrencies, helping to improve investor confidence.
The terms of the proposed legislation are still subject to change before the final draft of the bill is passed.
The withdrawal of investment capital from algo stables will be a bullish trend for other types of cryptocurrency projects – elsewhere in the market, new altcoin pre-sales are still attracting buyers.