A few days before a scheduled hearing on the topic on April 19, a draft of a new bill providing a framework for U.S. stablecoins was released in the House documents vault. The draft puts the Federal Reserve in charge of non-bank stablecoin issuers, such as the cryptocurrency company Tether and Circle, the issuers of Tether and USDC.
Stablecoins are a class of cryptocurrencies that attempt to provide price stability to investors by being backed by a specific asset or using algorithms to adjust supply based on demand. The stablecoin was launched in 2014 with the release of BitUSD.
According to the document, regulated depository institutions seeking to issue stablecoins would be regulated by appropriate federal banking agencies, while non-bank institutions would be regulated by the Federal Reserve. Failure to register can result in up to five years in prison and a $1 million fine. Issuers outside the United States must seek registration in order to do business in the country.
One of the factors for approval is the applicant's ability to maintain reserves backed by stablecoins in U.S. dollars or Fed notes, Treasury bills with a maturity of 90 days or less, and repurchase agreements backed by treasury bills with a maturity of 7 days or less with a maturity of 90 days or shorter deposits, and central bank reserve deposits. Additionally, issuers must demonstrate technical expertise and established governance, as well as the benefits of providing financial inclusion and innovation through stablecoins.
In a Twitter post, Circle’s CEO Jeremy Allaire stated that “deep bipartisan support for laws is clearly needed to ensure that digital dollars on the internet are securely issued, supported and operated.” Cointelegraph reached out to Tether, but no No reply was immediately received.
Additionally, as part of drafting legislation, the issuance, creation or launch of stablecoins not backed by tangible assets is prohibited for two years. It also determined that the U.S. Treasury Department will conduct a study on "endogenous collateralized stablecoins." According to the definition of the document, an endogenous stablecoin “is solely dependent on the value of another digital asset created or maintained by the same originator to maintain a fixed price.”
The draft further allows the U.S. government to establish standards for interoperability between stablecoins. It also determined that Congress and the White House would support the Federal Reserve's research on issuing a digital dollar.
