A new crypto bill is currently being discussed in the US Senate that would ban algorithmic stablecoins for two years. That reports Bloomberg. The ban would affect those stablecoins that rely on an interaction with another cryptocurrency to maintain dollar parity.
The creation and issuance of such stablecoins would be illegal under a first draft of the law. The two-year period is intended to give regulators the time they need to assess the algorithmic stablecoins in terms of their functionality and risks.
The most well-known example of algorithmic stablecoins to date has been Terra’s UST. In a death spiral coupled with the LUNA token, it spectacularly collapsed in May, dragging the entire crypto market into a bear market. And ensured that the regulators are now taking a closer look at the sector.