US Draft Bill Proposes Framework for Stablecoins

A new draft bill published in the United States aims to provide a regulatory framework for stablecoins. The bill proposes that the Federal Reserve oversee non-bank stablecoin issuers such as Tether and Circle, which respectively issue USDT and USDC. Insured depository institutions seeking to issue stablecoins would fall under federal banking agency supervision.

The bill also establishes criteria for approval of stablecoin issuers, including the ability to 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. Issuers must also demonstrate technical expertise and established governance, as well as the benefits of offering financial inclusion and innovation through stablecoins.

Additionally, the bill proposes a two-year ban on issuing, creating or originating stablecoins not backed by tangible assets. It also mandates that the U.S. Department of the Treasury conduct a study on “endogenously collateralized stablecoins.” These are stablecoins that rely solely on the value of another digital asset created or maintained by the same originator to maintain the fixed price.

The bill also allows the U.S. government to establish standards for interoperability between stablecoins. It further determines that Congress and the White House would support a Federal Reserve study on issuing a digital dollar.

Stablecoins are a class of cryptocurrencies that attempt to offer investors price stability by being backed by specific assets or using algorithms to adjust their supply based on demand. The draft bill defines stablecoins and proposes a regulatory framework that could potentially provide greater stability and protection for investors. It also aims to prevent the use of stablecoins for illegal activities, such as money laundering and terrorist financing. If enacted, the bill would require stablecoin issuers to register and could result in up to five years in prison and a fine of $1 million for failure to do so.