The US Congress is trying to push stablecoins deeper into regulation.
And possibly the broader global financial system.
A new 73-page bill published on Saturday (April 15) by the US House Financial Services Committee proposes that the Federal Reserve Board of Directors gain oversight over non-banking entities and digital asset companies seeking to issue stablecoins.
The discussion draft, titled “A bill to provide requirements for payment stablecoin issuers, digital dollar research and for other purposes,” establishes a set of stricter rules around the issuance of dollar-pegged digital assets in both the federal and state level, and establishes requirements for interoperability, reporting and enforcement.
It represents the first major piece of crypto law lawmakers have shared so far in 2023.
The draft also proposes a two-year moratorium on the creation and issuance of algorithmic stablecoins, as well as those backed by other cryptocurrencies, and separately includes a request from the US Treasury Department to evaluate the feasibility and working impact of a digital dollar central bank. study. currency (CBDC).
Penalties for companies and platforms issuing stablecoins without regulatory approval include prison terms of up to five years, as well as a $1 million fine.
Read also: Will FedNow’s July Launch Make Crypto and Stablecoins Obsolete?
‘Extraordinary moment’ for digital currency
Jeremy Allaire, CEO of crypto company Circle, which issues the stablecoin USD Coin (USDC). tweeted Saturday that the bill “represents an extraordinary moment for the future of the world dollar and the future of currency on the Internet.”
2/ It is an extraordinary moment for the future of the dollar in the world and the future of currencies on the Internet. There is clearly a need for deep, bipartisan support for laws that ensure that digital dollars on the Internet are safely spent, supported and managed.
— Jeremy Allaire (@jerallaire) April 15, 2023
Circle’s USDC stablecoin is the second largest dollar-pegged token by both market cap and circulating supply, behind Tether’s USDT stablecoin and ahead of Binance USD’s BUSD coin.
Both USDT and BUSD have come under separate scrutiny in recent months, and USDC temporarily detached from its $1 support following the collapse of Silicon Valley Bank (SVB), where Circle held $3.3 billion in assets.
“There is a clear need for deep, bipartisan support for laws ensuring that digital dollars on the internet are safely spent, supported and managed,” Allaire tweeted, adding that “there are clearly open and challenging issues with the bill as proposed.”
“It is time for US leadership, and that means clear regulation and encouraging entrepreneurship and innovation within the framework of US prudential law… now is the time for our country and our political leaders to really dig in and do this doing well,” he added. “The role of the dollar in the world is at stake.”
Also see: Regulators Clear Stablecoin Path for Reluctant Banks
As part of the bill’s proposed requirements, stablecoin issuers must “publish the monthly composition of the issuer’s reserve portfolio on the issuer’s website, in a format jointly determined by stablecoin’s federal payment regulators.”
Acceptable backup equipment for the coins includes U.S. currency, central bank reserve deposits, treasury bills with maturities of 90 days or less, as well as certain repurchase agreements backed by treasury bills of the same maturity. This is essentially a codification of the model that stablecoins, including USDC, USDT, and BUSD, already follow.
The legislation also requires that redemption requests, where stablecoin holders exchange their tokens for the national currency it supports, must be executed within a time frame of no more than one day after the redemption request.
Industry leaders serve as witnesses at house hearing
The published draft of the stablecoin bill comes ahead of a scheduled hearing on Wednesday (April 19) in which the House subcommittee on digital assets, financial technology and inclusion will meet to discuss cryptocurrency in a session titled “Understanding Stablecoins’ Role in Payments and Inclusion”. the need for legislation.”
In an interview with Karen Webster of PYMNTS last year, Rep. Patrick McHenry – who now heads the committee – said he wanted to focus on stablecoins if Republicans recaptured the House.
The witness list includes Superintendent Adrienne Harris of the New York State Department of Financial Services (NYSDFS); Circle’s Chief of Global Policy, Dante Disparte; and the chief policy officer of the Blockchain Association, Jack Chervinsky.
This Wednesday’s (April 19) discussion follows another House Financial Services Committee hearing on Tuesday (April 18) with Securities and Exchange Commission (SEC) Chairman Gary Gensler, who will address developments on the field of regulation and regulation, with a particular focus on crypto.
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