US Has Introduced Regulatory Framework For Stablecoins 

Members of the U.S. House of Representatives have attempted once more to develop a thorough regulatory framework for stablecoins (USDC, and Tether), or digital assets intended for payments with a constant price. 

In apparent anticipation of the upcoming hearing on the subject by the committee’s new panel focused on digital assets and financial technology on Wednesday (19 April). The House Financial Services Committee posted a new discussion draft bill without any public notice on Saturday. 

US Has Introduced A New Regulatory Framework For Stablecoins 

            Hearing on “Understanding Stablecoins’ Role in Payments and the Need for Legislation”

Stablecoin is a type of cryptocurrency whose value is pegged to a real asset like US $, Euro, or gold. And because of this pegging the value of the stablecoins get equal to the asset and depends on it to continuously maintain its stability. Whereas a normal cryptocurrency carries high volatility where the price can change easily. But the stablecoins are comparatively more stable and maintain their pegged price easily. This draft is not the final version of the bill; the changes will be seen after debates and talks in Washington in the next few days. 

This could be because of the de-pegging of the stablecoins like USDC, and Terra Luna Classic. All this started after the FTX collapse last year leading to a major drop in the crypto market. Such events have continuously shattered the crypto industry in 2022. 

What’s The Regulatory Framework For Stablecoins Bringing To The Table? 

US Has Introduced A New Regulatory Framework For Stablecoins 

  1. Put nonbank stablecoins under the control of the Federal Reserve

If the bill gets passed, the US central bank will approve and regulate the companies like Circle and Tether which issues USDC and USDT. Any of non-bank companies that are issuing stablecoins or planning to do this will require the approval of the primary financial regulator. Such as the National Credit Union Administration, Federal Deposit Insurance Corp., or Office of the Comptroller of the Currency. 

A $1 million fine and a maximum five-year prison sentence would apply if you failed to register. Regardless of the location of the organization, any issuer must register in order to conduct business in the United States.

US Has Introduced A New Regulatory Framework For Stablecoins 

2. New stablecoins can get temporarily banned if they don’t have cash backing.

The bill is also talking about putting a two-year ban on stablecoins that aren’t backed by any real asset. Tokens that already existed before the bill became law will get protection from the ban. It requires the Treasury Department to do research on the topic of such “endogenously backed” stablecoins.

3. Permit the government to establish interoperability standards

The National Institute of Standards and Technology and banking regulators would be able to set requirements for stablecoin interoperability. This is to ease of use, including necessary technical and legal requirements to enable users to clear and settle across various payment systems without purchasing native stablecoins for each. 

4. Instruct the Fed to investigate a digital dollar

Congress and the president would instruct the Federal Reserve to research the implications of CBDC once they pass it into law. The measure would require attention to specific topics, such as possible effects on monetary policy, financial stability, and individual privacy.

Final Thoughts

For the past few months, many times the Securities and Exchange Commission has mentioned some particular crypto including stablecoins should be considered securities. Causing legal issues for some cryptos and maybe this regulatory framework for stablecoins would bring some clarification. The hearing will happen on the 19 April focusing on “Understanding Stablecoins’ Role in Payments and the Need for Legislation.” If you need to understand how pegging and de-pegging work for Stablecoin, you can check out our video on Youtube

For more information on the regulatory framework for stablecoins, check out Suncrypto Academy.

Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. All content provided is for informational purposes only, and shall not be relied upon as financial/investment advice. Opinions shared, if any, are only shared for information and education purposes. Although the best efforts have been made to ensure all information is accurate and up to date, occasionally unintended errors or misprints may occur. We recommend you to please do your own research or consult an expert before making any investment decision. You may write to us at [email protected].

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