Sonic Labs Scraps Algorithmic Stablecoin Plans Amid Regulatory Pressure
A week ago, Sonic Labs announced plans to launch an algorithmic USD stablecoin, aiming to introduce a new yield-generating asset for its blockchain.
Yesterday, however, the company abruptly scrapped the idea. Co-founder Andre Cronje cited increasing regulatory scrutiny in the U.S. as the primary reason for the reversal.
Sonic Labs had initially revealed its stablecoin ambitions in mid-March, but shifting regulatory conditions have forced a change in direction. The decision follows the release of the full draft of the STABLE Act, which outlines stricter oversight for digital assets, including a proposed two-year moratorium on algorithmic stablecoins.
Confirming the pivot on social media, Cronje acknowledged that the evolving regulatory landscape had made it unfeasible to move forward. Unlike traditional stablecoins backed by fiat reserves, algorithmic stablecoins rely on smart contracts to maintain their peg. Regulatory scrutiny has intensified since the high-profile collapse of Terra’s TerraUSD (UST) in 2022, which led to widespread market fallout.
“We are no longer pursuing a USD-based algorithmic stablecoin,” Cronje stated.
The U.S. government is accelerating its efforts to regulate the stablecoin sector, with both the GENIUS Act and STABLE Act advancing in Congress. These proposals mandate full reserve backing for stablecoins and effectively sideline algorithmic models.
Lobbying efforts are underway to favor the GENIUS Act over the STABLE Act, while lawmakers push to finalize stablecoin regulations within two months. Industry giants like Tether, Circle, and Ripple are vying to play a central role in shaping the U.S. government’s stablecoin strategy as regulators consider using them to reinforce the dollar’s global dominance.
Editorial Team
Reporter at Coindoo
