US to weigh ban on certain stablecoins

The U.S. Treasury could ban certain stablecoins. Similar proposals are contained in the House of Representatives bill to create a comprehensive regulatory framework for regulating the digital assets market.

The author of the measure is Virginia Democrat Don Beyer. He described the current state of the space as \”unclear and dangerous for investors and consumers\”.

The congressman believes his initiative would provide \”basic protection against fraud, theft and manipulation\” that have accompanied the industry in recent years.

The bill is intended to address the following objectives:

• empower the CFTC to regulate cryptocurrencies, and the SEC to regulate digital securities after definitions of these assets are drawn up. Provide regulators with legal certainty for around 90% of the digital assets market (by market capitalization and trading volume);

• require recording transactions in a specially created repository within 24 hours if they do not appear on a public blockchain. This would minimise the likelihood of fraud;

• add digital securities and cryptocurrencies to the list of \”monetary instruments\” under the Bank Secrecy Act. This formalises regulatory requirements in line with anti-money-laundering provisions, record-keeping and reporting;

• provide the Fed with authority to issue a digital dollar as legal tender. Clarify that any other assets do not have such status. Give the U.S. Treasury secretary the power to permit or ban stablecoins backed by the dollar or other national currencies;

• order the FDIC, NCUA and SIPC to issue consumer guidance clarifying that cryptocurrencies or digital securities are not covered;

• require FinCEN, the SEC and the CFTC to provide clear definitions of the criteria for registering firms as a digital asset exchange or crypto-derivative, or as a money services business (MSB).

Earlier in July, Senator Elizabeth Warren urged tougher regulation of cryptocurrencies in the United States. In the same month, Federal Reserve Chair Jerome Powell doubted the need for stablecoins.

Treasury Secretary Janet Yellen announced the release of guidelines regarding the advantages and risks associated with stablecoins.

In June, Boston Fed President Eric Rosengren stated that stablecoins threaten the financial system. The Fed’s vice chair Randall Quarles urged not to fear stablecoins.

Earlier, a study by Yale economist Gary Gorton and Fed lawyer Jeffrey Chang forecasted the United States’ return to the era of ‘wildcat banking’ in the 19th century if stablecoins are not properly regulated.

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