- The United States SEC views stablecoins as a threat to the worldwide financial ecosystem.
- The US works on a bill that needs 1 – 1 reverse back-up for USD-tied stablecoins.
With several new draft bills across countries around the globe targeted to the cryptocurrency market, Laguna Labs exec Stefan Rust has said that centralized regulation can choke crypto innovation.
Rust stated that the foundation of crypto is antithetical to worldwide policies & the centralized fiscal system that global regulators seek to protect and uphold.
Crypto Legislation Attracting Attention
Two drafts of legislation have attracted attention in the crypto market. The United States Congress has negotiated on liable crypto development since the 9 March Biden executive order. Meanwhile, the US has two ongoing legislations focusing on USD-tied stablecoins.
Passing one of the bills will demand to back of the USD-tied stablecoins with one-to-one reserve. Also, authorizing the other bill will require stablecoin issuers to disclose their reserve tokens. The 3rd bill that the US negotiates targets restricting algorithmic stablecoins.
That will allow the United States SEC to execute a 2-year ban on the issuance & creation of algorithmic stablecoins. Moreover, such a move will empower the regulator to monitor what it perceives as a threat to the global monetary ecosystem.
The bill focuses on algorithmic stablecoins, targeting endogenously collateralized stablecoins. That means stablecoins with values secured by other digital tokens designed for that resolve. That means stablecoins like Terra’s UST, which crashed its parent project Terra LUNA.
Meanwhile, individuals related to the $60 billion debacle are encountering legal charges in South Korea, including the founder Do Kwon.
Centralized Regulation Bad for Cryptocurrency
Bitcoin arrived in the financial space in 2009 to resolve the chaos that triggered the 2008-09 global financial predicament. The monetary crisis emerged from illegal and unethical lending activities across multiple banks, welcoming a catastrophic fiscal meltdown that saw millions of individuals losing jobs, homes, and savings.
Self-Regulation Good for Cryptocurrency
Though Stefan remained against centralized cryptocurrency regulation, it doesn’t imply his against regulating the industry. He trusts self-regulation is lucrative for the emerging industry, and innovative individuals learn from mistakes like LUNA and UST.