Draft Stablecoin Bill Threatens Illegal Issuers With Up to 5 Years Prison

A draft stablecoin bill in the US is pushing for strict rules around the issuance of dollar-pegged digital assets

article-image

Dennis Diatel/Shutterstock, modified by Blockworks

share

The US House Financial Services Committee has published a draft bill on stablecoin regulation ahead of a Wednesday hearing.

A subcommittee on digital assets, financial technology and inclusion will meet this week to discuss crypto in a session titled: “Understanding Stablecoin’s Role in Payments and the Need for Legislation.” 

The conversation is likely to touch on the 73-page draft bill, published over the weekend, which seeks to create greater oversight of stablecoins after the multi-billion collapse of TerraUSD (UST) last year.

The bill would require stablecoin providers to maintain reserves backing their coins on an “at least one-to-one basis.” 

The reserves could be made of US currency, central bank reserve deposits, Treasury bills with a maturity of 90 days or less and certain repurchase agreements backed by Treasury bills with the same maturity period. Top stablecoins such as tether (USDT), USD Coin (USDC) and Binance USD (BUSD) essentially follow that model.

New York State Department of Financial Services Superintendent Adrienne Harris, Circle’s head of global policy Dante Disparte, Blockchain Association’s chief policy officer Jack Chervinsky are among those who will testify.

The bill seeks to take the stability of the US financial system into consideration — and the needs of the community — when approving stablecoin regulators.

If it’s formally introduced (and passes), the Federal Reserve’s board of governors would be given oversight of non-bank entities looking to issue stablecoins. Entities which issue stablecoins without being granted approval from regulators could face a $1 million fine or prison time of up to five years.

Loading Tweet..

Algorithmic stablecoins not welcome

The bill is shooting for a two-year moratorium on the issuance of “endogenously collateralized stablecoins” which haven’t already been created.

Such a stablecoin refers to any digital asset “in which its originator has represented will be converted, redeemed, or repurchased for a fixed amount of monetary value” and “relies solely on the value of another digital asset created or maintained by the same originator to maintain the fixed price.”

Unlike popular offerings USDT and USDC, UST wasn’t backed by other assets. The failed ‘algorithmic’ stablecoin instead relied on arbitrage via a secondary token, LUNA, to derive its dollar-value.

The bill also seeks to direct the Fed’s board and the Financial Crimes Enforcement Network to study the impact of a US central bank digital currency on its monetary policy tools, the country’s financial and banking sector and cross-border payment ecosystems.

Circle CEO Jeremy Allaire weighed in on the bill, saying in a tweet Saturday that the bill was comprehensive, but “there are clearly open and challenging issues with the bill as proposed, and now is the time for our country and political leaders to really dig in and get this right. The role of the dollar in the world is at stake.”

Wednesday’s discussion will follow another hearing attended by the full House Financial Services Committee with SEC Chair Gary Gensler on the agency’s regulatory developments and rule making.


Get the day’s top crypto news and insights delivered to your email every evening. Subscribe to Blockworks’ free newsletter now.


Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can’t-miss tweets and more from Blockworks Research’s Daily Debrief.


Can’t wait? Get our news the fastest way possible. Join us on Telegram and follow us on Google News.


Tags

upcoming event

MON - WED, MARCH 18 - 20, 2024

Digital Asset Summit (DAS) is returning March 2024. This year’s event will be held in our nation’s capital, where industry leaders, policymakers, and institutional experts will come together to discuss the latest developments and challenges in the ever-evolving world of cryptocurrency. […]

upcoming event

MON - WED, SEPT. 11 - 13, 2023

2022 was a meme.Skeptics danced, believers believed.Eventually, newcomers turned away, drained of liquidity and hope.Now, the tide is shifting and it’s time to rebuild. Permissionless II is the brainchild of Blockworks and Bankless. It’s not just a conference, but a call […]

recent research

Cosmos Hub: ATOM Economic Zone

Research

Replicated Security, the Hub’s Validation-as-a-Service offering that went live in March, is the first step in bringing value accrual to ATOM stakers.

/

article-image

Kenya’s central bank doesn’t seem enamored by the idea of a CBDC but hasn’t slammed the door shut yet

article-image

Both Ethereum and Solana have enjoyed vibrant DeFi environments, but this has not yet been the case for Cosmos

article-image

As Japan takes important step forward on stablecoins, industry participants say, proposed US laws around such crypto assets remain in flux

article-image

Stablecoins offer global financial access and on-chain transactions without limitations, while FedNow falls short in terms of utility, global reach and inclusivity

article-image

Connext wants to make using layer-2s and layer-3s a seamless experience

article-image

GameStop has been dabbling in Web3 initiatives since at least January 2022