Crypto Industry Protests Proposed US Ban on Algorithmic Stablecoins

By: Isha Das

A legislative bill propsed by US Senators to ban algorithmic stablecoins has met with significant backlash from the crypto industry. The proposed bill, spearheaded by Senators Cynthia Lummis and Kirsten Gillibrand, would only allow the use of centralized and custodial stablecoins.

Former Blockchain Association member Jake Chervinsky warned about the potential harm caused by the bill, describing it as deeply flawed. He asserted that the focus should be on regulating custodial stablecoins while allowing for further research into the impact of algorithmic stablecoins. Aaron Day, Chairman and CEO of the Daylight Freedom Foundation, voiced his opposition, saying that it would benefit banks rather than the crypto industry.

Interestingly, the bill was initially seen to have less-restrictive measures. Washington insiders informed FOX Business reporter Eleanor Terrett, that lawmakers have now shifted their stance. The growing pressure for stablecoin regulation in the Senate and an impending separate stablecoin bill are seen as factors influencing this shift. Nevertheless, many parties are said to be unimpressed with the current state of the bill.

The Lummis-Gillibrand Payment Stablecoin Act, as it currently stands, would explicitly prohibit unbacked algorithmic stablecoins. Such a measure can be seen in the light of the controversy following the collapse of Terraform Labs' algorithmic stablecoin TerraUSD in May 2022 which led to an $80 billion loss in the crypto market.