US House Publishes Stablecoin Draft Bill
WASHINGTON D.C. – The U.S. House Financial Services Committee has released a stablecoin draft bill that could significantly impact the crypto industry. The bill proposes a moratorium on stablecoins backed by other cryptocurrencies and calls for the study of a central bank digital currency (CBDC). If passed into law, it will significantly impact the crypto industry.
The stablecoin draft bill
The landmark legislation marks the first significant piece of crypto legislation to move in 2023, following three major incidents involving stablecoins over the past year: the collapse of TerraUSD (UST) and the USD coin (USDC) temporarily becoming unmoored from its $1 peg, and the collapse of the FTT token, leading to the demise of FTX.
The bill defines payment for stablecoin issuers and proposes a moratorium on stablecoins like UST until a study can be conducted. Additionally, it seeks to analyze the potential impacts of a CBDC. Under the published draft, the following implementations are proposed.
Nonbank stablecoins regulated: The Federal Reserve would approve and regulate nonbank stablecoins, such as Circle and Tether. Any stablecoin issuer, regardless of where their company is geographically based, would need to register with the Fed. Failing to register would result in a $1 million fine and five years imprisonment.
New, unbacked stablecoins ban: newly issued stablecoins not backed by a hard asset will be banned from registering stablecoins for two years. Tokens already in existence will be grandfathered in.
Interoperability standards set by the government: Banking regulators and the National Institute of Standards and Technology would set interoperability standards. This would include mandatory technical and legal specifications to enable users to clear and settle across different payment systems without buying native stablecoins for each.
Digital dollar study: The Federal Reserve will conduct a study on whether to issue a digital dollar, emphasizing the potential impacts on monetary policy, financial stability, and privacy for individuals.
Committee hearing forthcoming
The House Financial Services subcommittee will hold a hearing on stablecoins soon, featuring experts from Circle Internet Financial, the Blockchain Association, Columbia University, and the New York Department of Financial Services. The Financial Services Committee will also meet with Securities and Exchange Commission Chair Gary Gensler to discuss the bill's ramifications.
According to a spokesperson for Rep. Patrick McHenry (R-N.C.), the committee chair, the bill has been circulating among lawmakers since last fall but has not been shared with the public until now. This potential landmark stablecoin bill could have far-reaching consequences for the crypto industry and its regulation in the United States.
Comprehensive framework
The proposed bill aims to establish a comprehensive regulatory framework for stablecoins, providing clarity and certainty for investors. While it seeks to curtail concerns about investor protection and enforce financial stability, some crypto industry experts, such as Wendy O, have pushed back on the bill.
As negotiations and debates over the bill’s content continue in Washington, the stablecoin industry and stakeholders are watching the developments closely. No matter how the bill shakes out in Congress, it is one step closer to regulating the crypto industry in the U.S.
