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- Sonic Labs cancels stablecoin plan due to proposed US law banning algorithmic coins for two years.
- New draft bill targets coins without full reserves pushing developers to stop or delay new projects.
- Industry leaders prepare for strict rules as the US moves closer to stablecoin regulation.
Sonic Labs has canceled its plan to launch an algorithmic USD stablecoin. The decision comes only days after the company revealed its intent to build the new coin. This change follows the release of a draft bill from the U.S. Congress. The STABLE Act proposes a two-year ban on algorithmic stablecoins. The bill seeks to increase oversight and reduce risks in the stablecoin market.
The planned coin from Sonic Labs would have used smart contracts to maintain a dollar peg. Unlike traditional stablecoins, it would not rely on fiat or asset reserves. This type of model is under heavy scrutiny due to its risks. The 2022 collapse of TerraUSD showed how unstable such coins can be. The event caused major losses and sparked concern among regulators.
The new draft law directly challenges Sonic Labs’ project. Lawmakers aim to stop algorithmic stablecoins while they create better rules. The STABLE Act also supports full backing for all stablecoins. Coins must hold reserves equal to their supply. This makes algorithmic coins, which rely on code instead of collateral, non-compliant.
Developers React to Changing Rules
Sonic Labs co-founder Andre Cronje shared the update after the STABLE Act draft was made public. The company decided to stop the project before it could be impacted by future restrictions. This decision marks a clear shift in the company’s direction. It also reflects how regulatory pressure is now shaping blockchain projects.
The crypto community reacted quickly to the news. Some suggested loopholes or ways to launch before the law takes effect. Others discussed the idea of using different currencies. One proposal was a dirham-based algorithmic coin pegged to the U.S. dollar. Still, Sonic Labs has not confirmed any alternative plans at this time.
Other Stablecoin Bills in Focus
The STABLE Act is not the only bill under review. The GENIUS Act is another proposal moving through Congress. Both bills agree on key points. They call for 1:1 reserves and reject algorithmic models. The White House is showing more support for the GENIUS Act. However, both bills aim to limit stablecoin risks and strengthen regulations.
Industry Prepares for Tighter Oversight
Major firms like Tether, Circle, and Ripple are also responding. These companies are preparing for new laws that could reshape the market. They are working to stay compliant and keep their position in the U.S. stablecoin space. For now, many developers are pausing projects until the legal framework is clear. Sonic Labs’ move shows how quickly regulation can affect innovation in crypto.
