The US Congress is working on a new draft bill for regulating stablecoins that puts the Federal Reserve in charge of non-bank stablecoin issuers.

US Congress Working on a Draft Bill for Regulating stablecoins in the US

  • The US Congress is working on a new draft bill for regulating stablecoins that puts the Federal Reserve in charge of non-bank stablecoin issuers.
  • The possible framework for the regulation of stablecoins has been submitted to the document repository of the House of Representatives.
  • Insured depository institutions that aim to issue stablecoins in the United States would fall under the appropriate federal banking agency supervision.
  • If an issuer fails to register themselves with the Fed, they might be sentenced up to five years in prison, and a fine of $1 million might be levied.

The regulation of cryptocurrencies and stablecoins is long overdue in the United States, despite the country being one of the largest hubs of crypto-related activities. The primary regulatory bodies, like the Securities and Exchange Commission (SEC), have been cracking down on crypto exchanges and defining their offerings as securities. On the other hand, following the collapse of the UST (now USTC) crypto coin, the US Congress is working on a new draft bill for regulating these digital tokens pegged to fiat currencies. 

The new draft bill, which provided an insight into the possible framework for the regulation of stablecoins, has been submitted to the document repository of the House of Representatives just a few days before the actual hearing on the matter on April 19

It is crucial to note that the draft has put the Federal Reserve in charge of non-bank stablecoin issuers, such as crypto firms Tether and Circle, which are responsible for issuing USDT and USDC, the two largest stablecoins by market capitalization. 

Stablecoins are known for connecting investors to the world of cryptocurrencies by acting as a bridge. Not everyone can mine Bitcoin (BTC) and other tokens, and as a result, digital coins were created that were pegged to fiat currencies like the US dollar and allowed people to convert these coins for cryptocurrencies. An investor can purchase these coins via fiat, which can in turn be used to buy tokens like BTC, ETH, MATIC, etc. These coins were first seen in 2014 with the issuance of BitUSD.

As per the draft bill, insured depository institutions that aim to issue stablecoins in the United States would fall under the appropriate federal banking agency supervision. On the other hand, non-banking institutions with the same goal will be put under the oversight of the Federal Reserve, the central banking system of the United States.

More importantly, if the issuer of stablecoins fails to register themselves with the Federal Reserve, they might be sentenced up to five years in prison, and a fine of $1 million might be levied as well. Those who want to conduct business in the United States will have to register themselves in the country. 

In order to maintain operations within the boundaries of the US, the issuer will have to maintain reserves backing the stablecoins with US dollars or Federal Reserve notes, Treasury bills with a maturity of 90 days or less, repurchase agreements with a maturity of 7 days or less backed by Treasury bills with a maturity of 90 days or less, along with central bank reserve deposits.

It is also important to mention here that the issuers will be required to demonstrate technical expertise and established governance, along with the benefits of offering financial inclusion and innovation through stablecoins.

Jeremy Allaire, the CEO of USDC issuer Circle, commented on the new draft bill, adding that “it’s an extraordinary moment for the future of the dollar in the world, and the future of currency on the internet.” 

“Currency competition is heating up, and the playing field in this digital currency space race is moving extremely fast. It’s time for US leadership, and that means clear regulation and empowering  entrepreneurship and innovation within the framework of US prudential law,” said Allaire. 

As reported earlier by BitcoinWisdom, the Central Bank of Iran and Russia’s central bank will work together to create a gold-backed stablecoin, to weaken the US dollar’s dominance in the global economy. The two were collaborating to develop a “token of the Persian Gulf region” to be used as payment in global trade.

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Parth Dubey Verified

A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.

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