If a stablecoin issuer fails to register, they may face a penalty of up to $1 million and a maximum of five years imprisonment.
The United States House of Representatives has released a new draft bill aimed at regulating stablecoins. Stablecoins are a type of cryptocurrency that aim to provide price stability by being backed by specific assets or by adjusting their supply based on demand through algorithms. The draft bill was published a few days prior to a hearing on the subject, which will be on April 19.
Under the proposed legislation, non-bank stablecoin issuers such as Tether and Circle would be overseen by the Federal Reserve, while insured depository institutions would fall under the supervision of the appropriate Federal banking agency. The draft bill also stipulates that failure to register could result in a penalty of up to $1 million and a maximum of five years imprisonment. Furthermore, stablecoin issuers operating outside the United States would be required to register to do business in the country.
Approval for stablecoin issuance would depend on various factors, including the ability of the applicant to maintain reserves backing the stablecoins with U.S. dollars or Federal Reserve notes. This would include 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, as well as central bank reserve deposits.
Additionally, stablecoin issuers would need to demonstrate technical expertise and established governance, as well as show how offering financial inclusion and innovation through stablecoins could benefit the market.
The proposed draft bill represents a significant development in the regulation of stablecoins in the United States. While it remains to be seen how the legislation will be refined and implemented, it indicates that authorities are increasingly focused on bringing clarity and oversight to the cryptocurrency industry.