The US Congress is looking to bring stablecoins deeper into the regulatory fold.
And potentially the broader global financial system.
A new 73-page draft bill, published Saturday (April 15) by the US House Financial Services Committee is proposing that the Federal Reserve’s board of governors be given oversight of nonbank entities and digital asset firms looking to issue stablecoins.
The discussion draft, titled “A bill to provide requirements for payment stablecoin issuers, research on a digital dollar, and for other purposes,” lays out a series of stricter rules around the issuance of dollar-pegged digital assets across both the federal and state level, as well as establishes requirements for interoperability, reporting and enforcement.
It represents the first major piece of crypto legislation that lawmakers have so far shared in 2023.
Read more: FTX, Congress, Stablecoins: What 2023 May Bring For Crypto Regulations
The draft also proposes a two-year moratorium on the creation and issuance of algorithmic stablecoins as well as those backed by other cryptocurrencies, and it separately includes a request by the U.S. Treasury to study the feasibility and working impact of a digital dollar central bank digital currency (CBDC).
Penalties for firms and platforms that issue stablecoins without regulatory approval include prison time of up to five years, as well as a $1 million fine.
Jeremy Allaire, CEO of crypto company Circle, which issues the USD Coin (USDC) stablecoin tweeted Saturday that the bill represents “an extraordinary moment for the future of the dollar in the world, and the future of currency on the internet.”
Circle’s USDC stablecoin is the second-largest dollar-pegged token by both market capitalization and circulating supply, behind Tether’s USDT stablecoin and ahead of Binance USD’s BUSD coin.
Both USDT and BUSD have separately come under scrutiny in recent months, and USDC was temporarily de-pegged from its $1 backing following the collapse of Silicon Valley Bank (SVB), where Circle kept $3.3 billion of its assets.
“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,” Allaire tweeted, adding that “there are clearly open and challenging issues with the bill as proposed.”
“It’s time for U.S. leadership, and that means clear regulation and empowering entrepreneurship and innovation within the framework of U.S. prudential law… now is the time for our country and political leaders to really dig in and get this right,” he added. “The role of the dollar in the world is at stake.”
