draft bill on stablecoins places issuers like Tether under the Federal Reserve oversight

Stablecoins are a type of that aim to maintain a stable by pegging their to a traditional currency like the US . They are widely used in the for , , and remittances. But how are they in the US? And what does a new draft bill propose to change?

What is the current 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 Commission () may consider some stablecoins as securities, depending on how they are structured and marketed.
  • The Commodity Commission () may treat some stablecoins as commodities, subject to anti- and anti-manipulation rules.
  • The Financial Crimes Enforcement Network (FinCEN) may require some issuers and intermediaries to comply with anti- 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 lines.
  • The Federal Reserve () may monitor some stablecoin activities for their impact on , financial stability, and systems.

As you can see, the current regulation of stablecoins in the US is fragmented and uncertain. This creates challenges and for both stablecoin issuers and . For example:

  • Stablecoin issuers may face ambiguity, compliance costs, enforcement actions, and disputes.
  • Stablecoin users may face operational disruptions, price volatility, fraud, theft, 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 . 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 that is pegged or otherwise tied to a 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 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 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 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 . It could also stifle 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 for stablecoin users, but it could also restrict their choice and convenience. It could encourage more growth and 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 of stablecoins in the US? Let us know your thoughts in the comments below! 😊


Lauren Jones

By Lauren Jones

Hi, I’m Lauren Jones, a writer at avangernews.com. I love to write about health, wellness, and lifestyle. I’m always looking for new ways to improve my well-being and happiness, and I enjoy sharing my tips and advice with my readers. I have a degree in psychology from the University of Michigan, and I have worked as a health coach and a blogger before joining avangernews.com. When I’m not writing, I like to practice yoga, meditate, and cook healthy meals. You can follow me on Instagram @lauren_jones or email me at lauren@avangernews.com.

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