Democratic Rep: Stablecoin Issuers Don’t Have To Be Banks With 100% Reserves

As some lawmakers continue to push for stablecoins to be issued by only banks, one representative said ensuring stablecoins have sound reserves is more important

article-image

Source: Shutterstock

share

key takeaways

  • US Senators met Tuesday to discuss stablecoin regulation
  • Stablecoin issuers shouldn’t have to be banks as long as their reserves are secure, one representative argues

As US lawmakers discussed stablecoin regulation Tuesday, one New Jersey legislator called for greater transparency around the reserves that back stablecoins.

Josh Gottheimer, D-N.J., wants to see certain stablecoins classified as “qualified” if consumers can redeem the digital currency on a one-for-one basis with US dollars, according to a draft of a bill released Tuesday.

The proposal, dubbed the Stablecoin Innovation and Protection Act, comes as members of the Senate Committee on Banking, Housing and Urban Affairs gathered Tuesday to hear from a Treasury official on the matter.

The appearance of Jean Nellie Liang, the under secretary for domestic finance at the Department of the Treasury, comes one week after she discussed the same topic with House lawmakers: the recent report on stablecoins from the President’s Working Group on Financial Markets (PWG).

Senators were interested in hearing more about stablecoin reserve requirements, which is what Gottheimer’s proposal explores.

“Currently, if the issuer were to go belly up, in other words, if they were to go out of business, and they didn’t have reserves to cover the deposits…the holders of stablecoin would just be out of luck, right?” Sen. Chris Van Holland, D-Md., asked Liang.

“That is correct,” Liang said. There are currently no requirements for assets backing stablecoins such as USDC or Tether, she added.

To head off such risks, the federal report posits that stablecoin issuers must be federally insured depository institutions — more commonly known as banks.

Stablecoins issuers should be able to be banks or non-banks as long as their reserves are at least 100% in US dollars, Gottheimer’s office said Tuesday.

“For cryptocurrency to thrive here in the US, instead of overseas, we must provide more certainty to help boost innovation and protect consumers,” Gottheimer said in a tweet

Industry participants have gotten behind Gottheimer’s proposal, including Sam Bankman-Fried, the CEO of crypto exchange FTX, who said it’s “exciting” to see interest from lawmakers in stablecoin regulation.

“Stablecoins hold huge promise for payments and finance, and regulatory oversight and clarity can give them the trust and safety they need,” he added in a tweet

Gottheimer is now looking for input from lawmakers and crypto experts. Politicians have made it clear that further regulatory actions around cryptocurrencies should be expected in the coming months.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report - cover graphics (1).jpg

Research

In this report, we dive into crypto private market data to gather insights on where the future of the industry is headed. Despite a notable downturn in private raises, capital continues to infuse promising projects that aim to transform payments, banking, consumer experiences, community, and more, with 2023 being the fourth-largest year for crypto venture capital.

article-image

Revolut said that the standalone crypto exchange is currently “invite only”

article-image

The stock price jump comes after Coinbase reported ending its seven-quarter run of net losses during the fourth quarter

article-image

BUZZ holds shares of Coinbase, Robinhood and MicroStrategy

article-image

Opinion: Even though I didn’t pay for my “Diamond Hands” burger with BTC, don’t let that fool you into thinking that crypto’s development is futile

article-image

The results mark “a major positive inflection point,” one analyst says, as the exchange carries net income momentum into a crypto rally

article-image

While the slate of 10 US spot bitcoin funds have tallied $4.6 billion of net inflows thus far, half of the field is lagging the leaders