By Anjali Kochhar
The U.S. House Financial Services Committee has published a draft of a proposed stablecoin bill, which includes several proposals aimed at regulating the use of stablecoins. Stablecoins are digital tokens that are designed to maintain a stable value, usually pegged to a fiat currency such as the U.S. dollar.
Stablecoins can be backed by a reserve of the underlying asset or by other cryptocurrencies.
The new draft bill is half the length of a previous draft and is closely tailored to focus on rules governing the registration and approval process for individual prospective stablecoin issuers.
One of the key proposals in the bill is a moratorium on stablecoins backed by other cryptocurrencies, such as UST, until a study can be conducted. This proposal is likely in response to recent incidents involving stablecoins, including the blowup of terraUSD (UST), which was backed by a token called LUNA, and the temporary unmooring of USD coin (USDC) from its $1 peg.
The bill also calls for a study on the potential impact of a central bank digital currency (CBDC) issued by the Federal Reserve. CBDCs are digital versions of fiat currencies that are issued and backed by central banks.
In addition to these proposals, the bill creates definitions for payment stablecoin issuers, echoing a term that was used by former Senator Pat Toomey when he introduced his own stablecoin bill in 2022. This is an important step towards clarifying the regulatory status of stablecoins and ensuring that they are subject to appropriate oversight and supervision.
Overall, the proposed stablecoin bill represents a significant step towards regulating the use of stablecoins in the U.S. and ensuring that they are used in a safe and responsible manner. The bill is set to be discussed at a hearing by the House Financial Services subcommittee, which will feature industry experts and stakeholders, and it is likely to be subject to further revisions before it is passed into law.
A better version of previous draft
The bill includes many of the same provisions as a previous version that was negotiated last year. This includes a requirement for payment stablecoin issuers to be approved and regulated by either a federal payment stablecoin regulator or a registered state-qualified payment stablecoin issuer.
To be approved as an issuer, stablecoin providers must meet reserve capital requirements and provide monthly reports on their reserve portfolios. The bill also clarifies that stablecoins are not securities and should not be regulated by the SEC.
However, the new version of the bill gives state regulators a more prominent role in the market, even though most states do not have stablecoin regulatory frameworks in place. The bill allows state regulatory agencies more flexibility in establishing requirements for approval of stablecoin issuers as long as they meet a basic standard outlined in the federal legislation.
The bill also softens the previous language that required payment stablecoin issuers to redeem stablecoins for cash within one day. The new language instead requires issuers to establish procedures for the timely redemption of outstanding payment stablecoins.
Additionally, the bill provides states with more time to investigate and resolve potential noncompliance issues with approved issuers.
According to an anonymous Republican committee aide who briefed reporters on the bill, states will enforce their own laws, and the Federal Reserve will have backstop authority for depository institutions, credit unions, and their subsidiaries.
Republican committee members created the latest version of the bill, which they consider a “starting point” for discussions about stablecoin regulation with House Democrats, the Senate, and the White House in the coming months. As of now, no Democrats have expressed support for the bill. It is unclear when or if the bill will be formally introduced in the House, and committee members hope to receive feedback and engage in productive conversations before deciding on next steps.
The stable digital assets market is currently worth over $180 billion and operates without a clear legislative framework. As a result, regulators are in a “turf war,” with the Commodities Futures Trading Commission aiming to regulate stablecoins as commodities and the Securities and Exchange Commission aiming to regulate them as securities.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.