FameEX Hot Topics | US Congress to Introduce Draft Bill for a New Stablecoin

Stablecoins have emerged as a new class of digital assets that provide price stability and aim to mitigate the high volatility seen in other cryptocurrencies. These digital assets achieve stability by being backed by specific assets such as U.S. dollars or using algorithms to adjust their supply based on demand. While stablecoins have gained significant popularity since the release of BitUSD in 2014, the lack of clear regulatory guidance has been a significant barrier to their widespread adoption.

To address this, a draft legislation proposal from the US Congress has been introduced to provide a regulatory framework for stablecoins. The proposal aims to promote innovation, protect consumers, and maintain financial stability by regulating stablecoins in two categories: insured depository institutions and non-bank institutions. Insured depository institutions would fall under the appropriate federal banking agency's supervision, while non-bank institutions would be subject to Federal Reserve oversight. Failure to register could result in up to five years in prison and a fine of $1 million. Stablecoin issuers out of the United States would also have to seek registration to conduct business in the country.

To receive approval, stablecoin issuers must maintain reserves backing the stablecoins with U.S. dollars or Federal Reserve notes, Treasury bills with a maturity of 90 days or less, repurchase agreements with a maturity of seven days or less backed by Treasury bills with a maturity of 90 days or less, and central bank reserve deposits. The proposal also requires stablecoin issuers to demonstrate technical expertise and established governance, as well as the benefits of offering financial inclusion and innovation through stablecoins.

The proposed legislation also includes a two-year ban on issuing stablecoins not backed by tangible assets and establishes that the U.S. Department of the Treasury would conduct a study regarding “endogenously collateralized stablecoins.“ The proposal also allows the U.S. government to establish standards for interoperability between stablecoins and calls for a Federal Reserve study about issuing a digital dollar. Overall, the proposed legislation aims to regulate stablecoins to promote innovation, protect consumers, and maintain financial stability. It seeks to establish a regulatory framework that ensures stablecoin issuers maintain reserves backing the stablecoins and have established governance structures. The future of cryptocurrencies, including stablecoins, will depend on how well they can be regulated to ensure stability, innovation, and consumer protection.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.