- House Republicans propose new stablecoin legislation, transferring regulatory authority from the SEC to federal and state bank and credit union regulators.
- Key features include classifying stablecoins as not securities, requiring issuers to report monthly to a certified public accounting firm, and allowing state regulations to serve as a reference point for approvals.
- The bill aims to provide clarity in the stablecoin market and address concerns from industry executives and congressional Republicans.
House Republicans on the Financial Services Committee have recently proposed new draft legislation to regulate stablecoins, a type of cryptocurrency pegged to traditional assets like the U.S. dollar or short-term Treasury bills. The primary objective of the proposed legislation is to transfer authority over stablecoins from the Securities and Exchange Commission (SEC) to federal and state bank and credit union regulators.
This move comes in response to the ongoing criticism of SEC Chair Gary Gensler’s approach to digital assets, particularly stablecoins. The draft legislation follows the SEC’s investigation into BUSD, a stablecoin shared between digital asset infrastructure company Paxos and international crypto exchange Binance. If passed, the bill would create a comprehensive framework for stablecoins, focusing primarily on those used for payments.
Key Features of the Proposed Legislation
The new draft bill lays out several important features that would significantly impact the stablecoin landscape:
- Stablecoins would be classified as not securities, removing them from the SEC’s jurisdiction and ending the ongoing debate over whether tokens are securities or commodities. This decision would determine which agency oversees their trading – the SEC or the Commodity Futures Trading Commission (CFTC).
- Nonbank stablecoin issuers would be subject to regulatory examinations, requiring that every stablecoin be backed by legal tender or short-term Treasury bonds. Additionally, issuers must report monthly to a certified public accounting firm.
- 3State regulations would serve as a reference point for the new draft, with states allowed to approve stablecoin issuances using their standards. However, the bill sets a minimum criterion for state regulators to evaluate projects. The Federal Reserve would also have the authority to halt projects if the stablecoin does not meet the baseline criteria.
- Stablecoin issuers would be subject to anti-money laundering and know-your-customer requirements, similar to banks. Issuers waiting on full approval from regulators could receive a preliminary green light to start issuing stablecoins for up to a year while being evaluated.
What This Means for the Future of Stablecoins
The proposed legislation marks a significant shift in the approach to stablecoin regulation in the United States. By transferring authority from the SEC to federal and state regulators, the bill seeks to bring clarity to the stablecoin market and address the concerns of industry executives and congressional Republicans.
However, the new draft legislation still faces several hurdles before it can become law. It requires bipartisan support due to the current political landscape, with a Republican majority in the U.S. House of Representatives and a Democratic majority in the Senate, as well as sign-off from President Joe Biden, a Democrat. Currently, the bill lacks Democratic support, and it remains uncertain what level of bipartisan backing the effort will find.
The new draft stablecoin legislation represents a significant shift in the U.S. regulatory landscape, addressing some of the long-standing concerns surrounding digital assets. While the outcome of this proposal remains uncertain, it marks an essential step towards achieving greater clarity and regulation in the rapidly growing stablecoin market.
