US Congress introduces bill to regulate stablecoins

The US House of Representatives Financial Services Committee published a bill aimed at regulating the activities of stablecoin issuers.

The draft published is not the final version, as discussions in the United States government will continue.

The document will be considered at hearings scheduled for April 18. Among those taking part will be Jake Chervinsky, head of the Blockchain Association’s Digital Asset Promotion Office, and Dante Disparte, Circle’s Chief Strategy Officer.

A record posted on the Committee’s site notes that enacting a federal regime for ‘stablecoins’ would reduce costs for issuers. In the authors’ view, these tools could improve the efficiency of electronic payments, but come with significant risks.

The bill envisions the Federal Reserve as the regulator of centralized stablecoins such as USD Coin (USDC) and Tether (USDT). Specifically, the agency would issue licenses for the relevant activity.

Credit unions and banks seeking to issue their own ‘stablecoins’ would need approval from the regulators under whose jurisdiction they fall.

The measure would apply to all players in the sector providing services to U.S. citizens. Those without registration would face penalties, up to imprisonment.

The document contains a two-year (from enactment) moratorium on the issuance of stablecoins with endogenous collateral.

Among the latter are tokens pegged to the value of ‘other digital assets created or supported by the same operator’. The term also includes another characteristic — a guarantee of redemption for a ‘fixed monetary value’.

The ban does not extend to existing stablecoins.

The community noted that the proposed definition is too broad — it would capture almost all decentralized stablecoins, including DAI. Some also argue that the document effectively prohibits launching such projects in the United States.

Stablecoin legislation has been drafted in Congress

I read the bill.

TL;DR decentralized stables become illegal in the US (DAI, LUSD, RAI, etc. become illegal?) while centralized stables, defi, Ethereum, and ETH win big.

High-level summary⬇️
— decentralized stables become…

— Ryan Berckmans ryanb.eth?? (April 16, 2023)

If the bill passes, the Fed would also be tasked with conducting research into the potential impact of the issuance of CBDC on monetary policy, financial stability and data privacy.

In an interview with CoinDesk, a spokesperson for Committee Chairman Patrick McHenry said the published document has been circulating among lawmakers since autumn 2022.

The Circle cofounder and CEO Jeremy Allaire said the United States needs clear regulation of stablecoins if the country wishes to maintain its leadership. At the same time, he noted that the presented bill contains ‘open and challenging issues’.

6/ While comprehensive, there are clearly open and challenging issues with the bill as proposed, and now is the time for our country and political leaders to really dig in and get this right. The role of the dollar in the world is at stake.

— Jeremy Allaire (@jerallaire) April 15, 2023

In April 2023, Stellar’s Denelle Dixon called for the regulation of stablecoins to bolster the dollar.