The Financial Services Committee of the U.S. House of Representatives has finally unveiled stablecoin-focused cryptocurrency legislation and called for a temporary ban on algorithmic stablecoins, while recommending a framework for stablecoin issuers like Circle and Tether to define how their offerings can be regulated by state and federal agencies.
Bill published for cryptocurrencies
The House of Representatives Financial Services Committee has released the long-awaited discussion draft of the stablecoin bill. In short, the bill will create categories that issue stablecoins, whether banks or non-banks. It will push for a temporary ban on algorithmic stablecoins and will call for exploration of the potential impact of a central bank digital currency (CBDC).
The stablecoin bill has long been said to be a bipartisan piece of legislation and has genuine support from Representatives. Maxine Waters and Patrick McHenry, later chairman and most senior member of the House Financial Services Committee. The bill, which followed last year’s TerraUSD crash in particular, seemed to have momentum and interest within the broader crypto industry while focusing on a specific sub-sector.
With the bill, companies that issue stablecoins were defined
The bill creates a definition for “payment stablecoin issuers”, specifically referring to the companies behind any stablecoin used for payments or settlements. Issuers themselves must be a state or federally licensed entity and may be insured depository institutions (or a subsidiary of such an entity) or an approved non-bank entity. Issuers will also need to allow users to redeem their stablecoins within one day of the users’ redemption request.
Companies hoping to obtain a stablecoin issuing license will have to apply to the appropriate regulator at the state or federal level. The regulator will have 45 days to confirm it has everything it needs and another 90 days to make a decision. If the regulatory body does not make a decision, the application will be automatically approved. The regulatory body will also open the application for public comment. As Bennett Tomlin points out, the issuer of Tether, the world’s largest stablecoin, will have trouble allowing USDT to circulate in the US as the bill is currently being drafted.
Tether spokesperson made a statement
A Tether spokesperson said in a statement, “We are hopeful that the regulation of stablecoins will provide much-needed clarity for larger companies, institutions and fintech companies looking to enter the crypto market. In addressing the risks of stablecoins, financial regulators should more broadly articulate the goal of modernizing our payment system and increasing access to the financial system. We believe greater regulatory clarity will benefit the token economy.”
The next few pages of the proposed bill address the various requirements that stablecoin issuers must comply with. A stablecoin issuer that does not obtain a license to operate could face hefty fines of up to $100,000 per day. During this moratorium, the U.S. Secretary of the Treasury, the Securities and Exchange Commission, the OCC, the Federal Deposit Insurance Agency, and the Fed Board will review these stablecoins, and the report will be available within a year of the bill’s adoption.
Another chapter calls for a study of the “potential impact” of the central bank digital currency (CBDC) or digital dollar on the Fed’s monetary policy instruments, the US financial sector, the banking sector, and financial stability and payment services. The Treasury Department, along with various regulatory agencies, will be required to report the results of this study to the Financial Services Committee and the Senate Banking Committee within 180 days.
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