• The House Financial Services Committee has proposed a bill to regulate stablecoin issuers and create categories for payment.
• Tether and Circle, the two largest stablecoin issuers in the world, would be impacted by the regulations.
• The bill requires licensing, fines for stablecoin issuers, customer protection rules, risk management, capital requirements and a study of central bank digital currencies (CBDC).
The House Financial Services committee has unveiled its long-awaited stablecoin legislation. This proposed bill will introduce distinct categories for payment stablecoin issuers which must be licensed entities at either the state or federal level. Additionally, it imposes a temporary ban on algorithmic stablecoins while requiring all companies seeking to issue them to apply with an appropriate regulator. If no decision is made within 45 days of receipt then approval is automatically granted followed by public comment on the application.
Payment stablecoin issuers are required to maintain reserves that back their stablecoins with assets such as United States coins and currency, Treasury bills, repurchase agreements or central bank reserve deposits. Furthermore, stringent requirements have been put in place for areas such as customer protection rules and risk management that include capital requirements and oversight provisions. Failure to obtain the required license could result in substantial fines of up to $100,000 per day for these issuers.
Tether expressed optimism that regulation could bring clarity for larger corporates, institutions and fintech companies entering the crypto market despite this having significant implications for itself and Circle who’s current practices do not align with the proposed regulations. However they are both still optimistic about being able to continue operating under this new legislation once it is passed into law.
The bill also includes a two-year moratorium on endogenously collateralized stablecoins which are backed by other digital assets or use alternative mechanisms to maintain their value. This will give enough time for regulators to further review how they operate before determining if they should be allowed onto the market permanently or not.
Finally there is also a provision included in this bill which requires studying potential impact of central bank digital currencies (CBDC). This is designed to allow regulators better understand what impact CBDCs might have on traditional markets before deciding whether or not they should be allowed access into those markets at some point in future if deemed necessary or beneficial enough