The creation and issuance of 'endogenously collateralized' stablecoins will be illegal.
2022 was the year of some of the worst cryptocurrency crashes, notably the Luna crypto crash, followed by its stablecoin USTC losing its $1.00 peg.
The U.S government is mulling over introducing a two-year stablecoin ban
According to the article, the house committee is also considering a study into TerraUSD-type stablecoins in consultation with the Federal Reserve.
The terms of the proposal can be changed before the final version of the draft is released for further review.
However, the report adds that the House Financial Service Committee Chairwoman, Maxine Waters, and ranking member Patrick Henry are currently working to reach a favourable consensus. Bloomberg adds that the final draft could be released as early as next week.
In addition to banning the creation of algorithmic stablecoins, the bill also seeks to permit banks and non-banks to issue stablecoins. The bank issuers will reportedly seek permission from their federal regulators to carry out the stablecoin issuance.
The Terra Luna and USTC crash resulted in a collective loss of $42 billion worth of investors' funds and drew intense criticism from traditional markets. Calls for crypto regulation grew louder with investors underlining the need for drafting a detailed crypto bill that regulates the sector without hampering its progress.