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Sonic Labs announced its decision to abandon plans to launch an algorithmic USD stablecoin due to new regulatory measures being implemented in the United States. The company had initially aimed to develop a profitable algorithmic stablecoin back in March.
Sonic (S) News
Following the legislative proposal prepared by the U.S. Congress, regulatory changes prompted the company to reevaluate its plans. According to the draft, regulations are anticipated to halt algorithmic stablecoins for two years, diminishing Sonic Labs’ interest in the project.
The collapse of Terra has left a negative impression regarding algo stablecoins, particularly concerning their reserve structures and peg protection mechanisms, which carry significant risks.
Stablecoin Legislation
In the U.S., legislative proposals named the STABLE Act and the GENIUS Act offer alternative approaches to algorithmic models. Current regulations aim to implement stable digital assets backed by institutional collateral, attempting to prevent the recurrence of issues experienced with Terra USD in the past.
Co-founder Andre Cronje announced via social media that the project has been canceled.
Andre Cronje: We are no longer planning to release a USD-based algorithmic stablecoin.
Community members discussed the potential for developing different strategies before the regulations took effect, suggesting that the company might explore alternative methods in the future.
As leading firms in the sector strive to strengthen their positions amid regulatory uncertainties, the cautious approach of the U.S. government is noteworthy. Leading companies like Tether, Circle, and Ripple 
$2 are already preparing to comply with new regulations.
This decision by Sonic Labs reflects the impact of market uncertainties and regulatory pressures. Developments aim to mitigate risks for involved parties, yet various opinions exist regarding the long-term effects of regulations on the sector.
Disclaimer: The information contained in this article does not constitute investment advice. Investors should be aware that cryptocurrencies carry high volatility and therefore risk, and should conduct their own research.
