A recent draft bill outlining a regulatory framework for stablecoins in the United States has been published on the House of Representatives’ document repository, just days before an April 19 hearing on the subject. The draft designates the Federal Reserve as the regulator for non-bank stablecoin issuers, such as Tether and Circle.
Stablecoin Oversight and Registration
Stablecoins are a category of cryptocurrencies designed to provide price stability by being backed by specific assets or using algorithms to adjust supply according to demand. They were first introduced in 2014 with BitUSD. According to the draft bill, insured depository institutions issuing stablecoins would be supervised by the appropriate federal banking agency, while non-bank institutions would fall under Federal Reserve oversight. Unregistered issuers could face up to five years in prison and a $1 million fine. Issuers outside the United States would be required to register to conduct business in the country.
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Requirements for Approval
To be approved, applicants must demonstrate their ability to maintain reserves backing the stablecoins with U.S. dollars or Federal Reserve notes, Treasury bills with maturities of 90 days or less, repurchase agreements with maturities of 7 days or less backed by Treasury bills with maturities of 90 days or less, and central bank reserve deposits. Issuers must also show technical expertise, established governance, and the potential benefits of promoting financial inclusion and innovation through stablecoins.
Industry Response and Additional Provisions
In a Twitter thread, Circle’s CEO, Jeremy Allaire, stated that “there is clearly the need for deep, bi-partisan support for laws that ensure that digital dollars on the internet are safely issued, backed, and operated.”
The draft legislation also proposes a two-year ban on issuing, creating, or originating stablecoins not backed by real assets and requires the Treasury Department to conduct a study on “endogenously collateralized stablecoins.” The draft enables the U.S. government to establish standards for stablecoin interoperability and indicates congressional and White House support for a Federal Reserve study on issuing a digital dollar.
