Sonic Labs Cancels Plans to Launch an Algorithmic USD Stablecoin

Barely a week after hinting at launching an algorithmic USD stablecoin, Sonic Labs is shuttering its plans. Sonic Labs co-founder Andre Cronje revealed that incoming stablecoin regulation in the US contributes to the change of stance.

Sonic Labs will not be launching an algorithmic USD stablecoin, co-founder Andre Cronje has revealed.

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After hinting at launching an algorithmic USD stablecoin, Sonic Labs has pivoted away from its plans.

The move follows the release of the full draft of the STABLE Act by Congress. The legislation aims to provide clearer oversight of stablecoins in the US, setting a two-year moratorium on algorithmic stablecoins.

Unlike mainstream stablecoins backed by fiat or other commodities, algorithmic stablecoins use smart contracts to maintain their peg to the dollar. In 2022, the collapse of Terra’s ecosystem after its TerraUSD (UST) algorithmic stablecoin de-pegged sparked concern among regulators.

Announcing the change in stance, Cronje said via X that Sonic Labs will now not be releasing a USD-based algorithmic stablecoin.

As lawmakers continue to debate the optimal approach to governing stablecoins, industry players are preparing for new regulations.

Both the GENIUS Act and STABLE Act in the House and Senate respectively require a 1:1 ratio of reserves for stablecoins. They also avoid discussing algorithmic stablecoins.

The White House is reportedly favoring the GENIUS Act over the STABLE Act as lobbyists try to avoid the possibility of a Conference Committee.

Authorities are aiming to get stablecoin legislation to Trump’s desk in two months. Meanwhile, Tether, Circle, and Ripple are vying to lead the US government’s ambitions to use stablecoins to maintain the dollar’s global dominance.