Rolling out its first major piece of crypto legislation in 2023 US House Financial services committee publishes draft version of potential landmark stablecoin bill. The new draft bill is expected to provide a comprehensive regulatory framework for stablecoins in the U.S. It contains sweeping proposals such as making the Federal Reserve the regulator for stablecoins by non bank entities, a moratorium on stablecoins backed by other cryptocurrencies and a request to study a central bank digital currency (CBDC).These provisions are unsurprising, considering the Bill was drafted against Terra UST’s algorithmic stablecoin collapse in 2022. As tweeted by Circle CEO Jeremy Allaire, the new stablecoin bill could prove pivotal for the future of the U.S. dollar.
Key Provisions of the Draft Stablecoin Bill
The Bill allows non bank entities to register and clearly states the factors that regulatory bodies must consider to grant these firms an operating license. According to the Bill, firms that fail to register with the authorities could be liable to a $1 million fine or a five years imprisonment.
It also focuses on fraud prevention and tackles depegging of stablecoins. The Bill explicitly prohibits rehypothecation and commingling of funds. It also makes strict provisions for stablecoin issuers’ disclosure and attestation, while they must establish a straightforward redemption process.
The bill further proposes a 2-year moratorium on creating, originating, and issuing endogenously collateralized stablecoins that are not already in existence. It directs regulators to research this type of stablecoins and publish a report within a year of the enactment of the Act.
A House Financial Services Sub-Committee shall hold the public hearing on the bill on wednesday April 19th 2023.It will feature Circle’s Dante Departe, The Blockchain Association’s Jake Chervinsky, Columbia professor Austin Cambell and New York department of Financial Services Superintendent Adrienne Harris.
Highlights of what the draft bill would do if it becomes law:
If the bills become a law it will put the Federal Reserve in charge of nonbank stablecoins The U.S. central bank would then be able to approve and regulate non-bank companies like Circle and Tether that currently issue or want to issue their own stablecoins in the U.S. Credit unions and banks that want to issue their own stablecoins could do so with approval from the main financial regulator they fall under, the National Credit Union Administration, Federal Deposit Insurance Corp. or Office of the Comptroller of the Currency. Failure to register would be punishable by up to five years in prison and a $1 million fine. Any issuer that wants to do business in the U.S., regardless of where the company is based, would need to register.