WASHINGTON — A nearly finalized law between Democrats and Republicans on the House Financial Services Committee would authorize the Federal Reserve to license non-bank stablecoin issuers and introduce a two-year moratorium for algorithmic stablecoins.
House lawmakers have worked behind the scenes for months in an effort to create a bipartisan legislative framework for stablecoins, a type of digital asset designed to maintain a constant value in order to facilitate cryptocurrency transactions.
The latest draft is the product of weeks of back-and-forth between Democrats and Republicans. The legislative text, reviewed by American Banker Tuesday night, was prepared by the office of House Financial Services Chair Maxine Waters, D-Calif., and by ranking member Patrick McHenry, R.N.C. Reflects conversation with.
Representative Maxine Waters, a Democrat from California and chair of the House Financial Services Committee, speaks with Representative Patrick McHenry, a Republican and ranking member from North Carolina. A draft bill on stablecoins negotiated between McHenry and Waters was reviewed by a US banker.
Andrew Harrer / Bloomberg
It is unclear whether McHenry will support the latest draft. Representatives for McHenry and Waters did not immediately respond to a request for comment, but McHenry told Politico that he was “cautiously optimistic” that a settlement could be reached by the end of the 117th Congress.
Under the draft law, a “payment stablecoin” would be defined as a digital asset “that is or is designed to be used as a means of payment or settlement” where a stablecoin The issuer will be “obliged to convert, redeem or repurchase” a certain amount of monetary value.” Stablecoins must also maintain a “reasonable expectation that it will maintain a stable value.”
In a potential win for the fintech sector, non-depository institutions will have the opportunity to apply for a stablecoin license from the Federal Reserve – an application process that will be public and subject to comment. Banks, for their part, would be allowed to own stablecoin subsidiaries that would be regulated by their current supervisors.
as already reported, the regulatory regime under consideration by lawmakers would require all stablecoin issuers to maintain reserves on a one-to-one basis. The draft law would allow issuers to use US currency, Treasury bills with maturities of 90 days or less, 7-day repurchase agreements backed by Treasury bills, as well as central bank reserve deposits.
One of the more controversial elements of the draft law for Republicans will be its harsh treatment of algorithmic stablecoins, a subset of digital assets that gained considerable notoriety at the time of the crypto project TeraUSD. Collapsed in May. TeraUSD used an algorithm to attempt to keep its peg on the US dollar.
Under the bill, it would be illegal to issue “endogenously collateralized stablecoins” in the US for two years. The Treasury Department will be authorized to study algorithmic coins, along with regulators from the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Federal Reserve and the Securities and Exchange Commission.
american banker previously reported That the law’s treatment of algorithmic stablecoins was a flashpoint between Democratic and GOP policymakers. Another area of disagreement revolves around consumer security for digital wallets, where consumers and institutions hold crypto. There is no reference to digital wallet in the latest version of the bill.
The draft authorizes the Federal Reserve to conduct a study on the “impact of the US central bank digital currency,” known as the digital dollar. However, the law falls short of actually authorizing the Fed to create a CBDC. Treasury Department last week issued a report On digital assets that appeared to be making the case for digital currency while barring the Fed from instructing to do so.
