US draft bill on stablecoins places issuers like Tether under the Federal Reserve oversight
Stablecoins are a type of cryptocurrency that aim to maintain a stable value by pegging their price to a traditional currency like the US dollar. They are widely used in the crypto market for trading, payments, and remittances. But how are they regulated in the US? And what does a new draft bill propose to change?
What is the current regulation of stablecoins in the US?
Currently, there is no clear or consistent regulation of stablecoins in the US. Different agencies have different views on how to classify and oversee them. For example:
- The Securities and Exchange Commission (SEC) may consider some stablecoins as securities, depending on how they are structured and marketed.
- The Commodity Futures Trading Commission (CFTC) may treat some stablecoins as commodities, subject to anti-fraud and anti-manipulation rules.
- The Financial Crimes Enforcement Network (FinCEN) may require some stablecoin issuers and intermediaries to comply with anti-money laundering and counter-terrorism financing regulations.
- The Office of the Comptroller of the Currency (OCC) may grant some stablecoin issuers national bank charters, allowing them to operate across state lines.
- The Federal Reserve (Fed) may monitor some stablecoin activities for their impact on monetary policy, financial stability, and payment systems.
As you can see, the current regulation of stablecoins in the US is fragmented and uncertain. This creates challenges and risks for both stablecoin issuers and users. For example:
- Stablecoin issuers may face regulatory ambiguity, compliance costs, enforcement actions, and legal disputes.
- Stablecoin users may face operational disruptions, price volatility, fraud, theft, loss of funds, and lack of consumer protection.
Therefore, many stakeholders have called for a more coherent and comprehensive regulatory framework for stablecoins in the US. And that's where the new draft bill comes in. 🙌
What does the new draft bill propose for stablecoins in the US?
The new draft bill is called the Stablecoin Classification and Regulation Act of 2023. It was published on the House of Representatives' document repository on April 13th, 2023. It aims to provide a clear definition and classification of stablecoins in the US, and to establish a consistent regulatory regime for them.
The main features of the draft bill are:
- It defines a stablecoin as “a digital asset that is pegged or otherwise tied to a fiat currency or other reference asset.”
- It classifies stablecoins into two types: bank-issued stablecoins and non-bank-issued stablecoins.
- It grants banks the authority to issue their own stablecoins, subject to existing banking laws and regulations.
- It places non-bank-issued stablecoins under the oversight of the Fed, which would set rules and standards for their issuance, reserve management, redemption, audit, reporting, disclosure, consumer protection, and other aspects.
- It requires non-bank-issued stablecoin issuers to obtain a license from the Fed before issuing any stablecoins.
- It prohibits companies from issuing their own stablecoins unless they are banks or licensed by the Fed.
- It requires non-bank-issued stablecoin issuers to maintain 100 percent reserves in US dollars or other approved assets at all times.
- It authorizes the Fed to examine, supervise, regulate, enforce, and take corrective actions against non-bank-issued stablecoin issuers.
The draft bill is expected to be introduced in Congress soon. It has been sponsored by Representative Don Beyer (D-VA), who is also the chair.
What are the implications of the draft bill for stablecoins in the US?
The draft bill, if passed, would have significant implications for the stablecoin industry in the US. It would create a clear legal status and regulatory framework for stablecoins, which could enhance their legitimacy, transparency, accountability, and stability. It could also foster innovation and competition in the stablecoin market, as banks and non-banks would be able to offer their own stablecoins under a level playing field.
However, the draft bill could also pose some challenges and risks for the stablecoin industry in the US. It could impose high barriers to entry and compliance costs for non-bank-issued stablecoin issuers, which could limit their diversity and accessibility. It could also stifle innovation and experimentation in the stablecoin space, as non-bank-issued stablecoin issuers would have to adhere to strict rules and standards set by the Fed. It could also create regulatory uncertainty and conflict, as other agencies may have different or overlapping jurisdictions over stablecoins.
Therefore, the draft bill could have both positive and negative effects on the stablecoin industry in the US. It could bring more clarity and consistency to the regulation of stablecoins, but it could also reduce their flexibility and variety. It could promote more safety and security for stablecoin users, but it could also restrict their choice and convenience. It could encourage more growth and development in the stablecoin market, but it could also hinder some innovation and experimentation in the stablecoin space.
What do you think of the draft bill? Do you think it is a good or bad idea for the regulation of stablecoins in the US? How do you think it will affect the future of stablecoins in the US? Let us know your thoughts in the comments below! 😊
Sources:
- US draft bill on stablecoins places issuers like Tether under the Federal Reserve oversight
- Proposed Stablecoin Legislation Is Worse Than Nothing
- Stablecoins to face bank-like U.S. regulation under draft House bill -source
- CoinStats – US draft bill on stablecoins places issuers like Tether under the Federal Reserve oversight
- Crypto411 on Twitter: “US draft bill on stablecoins places issuers like Tether under the Federal Reserve oversight: A new draft bill that provides a stablecoin framework in the United …”
- Stablecoin Draft Bill: Safe Harbor for Issuers | PYMNTS.com