The measure would require stablecoin issuers to have reserves that back the digital assets on an “at least one-to-one basis.
HFSC
The House Financial Services Committee published a draft bill on stablecoin regulation Saturday, its first major piece of crypto-related legislation in 2023.
The bill, which does not yet have a number, would require stablecoin issuers to have reserves that back the digital assets on an “at least one-to-one basis.”
Those reserves could be composed of U.S. coins or currency, Treasury bills with a maturity of 90 days or less, central bank reserve deposits, and repurchase agreements with a maturity of seven days or less that are backed by Treasury bills with a maturity of 90 days or less.
The bill would give the Federal Reserve (FED) power over nonbank stablecoin issuers like Tether and Circle, which issue USDT and USDC, respectively. Stablecoins issued by insured depository institutions would fall under the regulators of that bank.
It would also impose a two-year moratorium on crypto-backed stablecoins and commission a study on a central bank digital currency; and it would impose harsh penalties on those stablecoin issuers who fail to register their offerings: illegal issuers could face up to five years in prison and a $1 million fine.
Stablecoins are a type of digital currency designed to be pegged to a fiat money, therefore offering investors more price stability than cryptocurrencies like Bitcoin or Ethereum. USDT and USD Coin, for example, are pegged to the U.S. dollar and both worth $1.
Lawmakers published the draft ahead of a Wednesday hearing.
Top 5 Stablecoins
The proposed legislation would regulate stablecoin issuers such as Circle and Tether through the Federal Reserve Bank. Banks and credit unions that want to issue their own stablecoins would need approval from their respective regulatory bodies such as the Federal Deposit Insurance Corporation (FDIC) or the Office of the Comptroller of the Currency (OCC). Registration would be mandatory for any issuer looking to conduct business in the US, regardless of their headquarters.
Another provision in the bill would prohibit uncollateralized stablecoins for two years. This would make over-collateralized, decentralized stablecoins illegal in the US, dealing a major blow to the DeFi industry if the bill is passed in its current form. Stablecoins like MakerDAO's DAI, which existed before the bill was proposed, would be excluded from the proposal under a grandfather clause. However, the US Department of the Treasury should still monitor the sector closely.
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