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 news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

REPORT_Template.png

Research

The Sonic blockchain is leveraging redesigned airdrop incentives and its FeeM program to propel DeFi activity and attract institutional capital, setting the stage for ecosystem growth. Within this environment, leading protocols Shadow Exchange and Silo are poised to asymmetrically benefit due to innovative features and favorable valuations, despite facing ecosystem dependency and competitive pressures. This positions them as compelling, potentially shorter-term, investment opportunities contingent on Sonic's sustained success.

article-image

Bitcoin needs a price, but its magic runs deeper

article-image

Circle had a pretty successful first day of trading, but what’s next for the stablecoin issuer?

article-image

Solana’s USDC caught a boost after being paired with the TRUMP memecoin

article-image

The stablecoin issuer’s successful first day of trading is likely to spur more crypto IPOs, industry watchers say

article-image

Job openings rallied and continuing claims stalled ahead of May’s employment report

article-image

A group of Twitch streamers battle for bitcoin. Will their chats help them?