US House Committee To Introduce New Draft Bill For Stablecoins

The latest draft bill giving a framework for stablecoins in the US was introduced on April 15 in the House of Representatives document repository ahead of an April 19 hearing on the matter. The draft, which is present on the Committee hearings page, is the first main section of crypto legislation to be introduced in 2023.

Stablecoins are a type of crypto asset. They seek to offer users price stability by being assisted by specific assets (such as a fiat currency or gold) or by using algorithms to adjust their supply based on demand. BtcUSDT, the world’s first stablecoin, was introduced on July 21, 2014.

The bill calls for a ban of new stablecoins backed by other types of tokens until a search is made. For example, terraUSD (UST) is supported by a token known as LUNA.

The bill places the Federal Reserve as the regulator for non-bank stablecoin entities. For instance, crypto firms Circle and Tether, respectively, USD Coin and Tether USDT. USD is the second most popular stablecoin by market capitalization. In addition, the bill seeks to explore the potential impact of central bank digital currencies (CBDCs) and recommends further study on digital dollars.

Jeremy Allier, Circle’s CEO, said in a Twitter thread:

“There is clearly a need for deep, bipartisan support for legislation that ensures digital dollars are securely issued, supported, and operated on the Internet.”

Moreover, Allaire noted that the bill has many open and difficult issues that stakeholders need to address.

Key Elements Of Draft Stablecoins Bill

The document states that insured depository institutions wishing to issue stablecoins would be subject to the oversight of the appropriate federal banking agency. On the other hand, non-bank platforms will come under Federal Reserve supervision. In case of violence, the companies will have to pay a fine of 1M dollars.

Issuers outside the United States must obtain permission to continue their operations in the country. The bill also focuses on dealing with depeg stablecoins and fraud prevention.

One of the approval factors is the applicant’s ability to maintain reserves backing the stablecoins with US dollars. Other factors include maintenance of treasury bills with maturities of 90 days or less, central bank reserve deposits, and repurchase agreements with maturities of 7 days.

Following recent global incidents, the primacy of the US dollar has come under growing threat. Balaji Srinivasan, former chief technology officer (CTO) of Coinbase, voiced these concerns. He said that the dollar is no longer big enough to sink.