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US Congress to Introduce New Stablecoin Bill

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A new bill governing stablecoins in the United States has been published on the filing of documents from the House of Representatives, a few days before a audience on the subject on April 19. The draft entrusts the Federal Reserve with non-bank issuers of stablecoins, such as crypto firms Tether and Circle, issuers of Tether (USDT) and USD Coin (USDC), respectively.

Stablecoins are a class of cryptocurrencies that attempt to provide investors with price stability by relying on specific assets or using algorithms to adjust their supply based on demand. Stablecoins were introduced in 2014 with the release of BitUSD.

According to the document, insured depository institutions seeking to issue stablecoins would fall under the appropriate supervision of the Federal Banking Agency, while non-bank institutions would be subject to the supervision of the Federal Reserve. Failure to register could result in up to five years in prison and a $1 million fine. Issuers outside the United States should register to do business in the country.

Approval factors include the applicant’s ability to maintain stablecoin-backed reserves with US 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, as well as central bank reserve deposits.

Additionally, issuers must demonstrate technical expertise and established governance, as well as the benefits of offering financial inclusion and innovation through stablecoins.

On a Twitter thread, Circle CEO Jeremy Allaire said that “there is a clear need for deep, bipartisan support for laws that ensure digital dollars on the internet are securely issued, supported and operated.” Cointelegraph contacted Tether, but did not receive an immediate response.

In addition, the bill provides a two-year ban on issuing, creating, or creating stablecoins not backed by real assets. It also establishes that the Treasury Department would conduct a study regarding “endogenously backed stablecoins.”

According to the document’s definition, endogenously stablecoins “rely solely on the value of another digital asset created or maintained by the same creator to maintain the fixed price.”

The project further enables the US government to establish interoperability standards between stablecoins. It also determines that Congress and the White House would support a Federal Reserve study on issuing a digital dollar.

Magazine: Unstable coins: unanchoring, bank runs and other imminent risks