By Shelly Melancon (Switzerland)
United States Congressman Josh Gotthiemer has presented the first draft of the bill for stablecoin legislation to the Senate on the morning of the hearing on the topic. Named Stablecoin Innovation and Protection Act, the bill aims at explaining stablecoins and giving them a proper definition to differentiate them from other volatile digital assets.
A copy of the legislation reads, “the bill defines stablecoins as claimable crypto on demand for a unit of the US Dollar. It can be issued by an insured depository entity or a non-bank qualified issuer.” The bill also aims to put the proper protections for investors and consumers to prevent money laundering and risks of fraud.
Non-Bank Issuer Reserve Must Constitute USD Through and Through
One of the main components in the bill referred to a December report about limiting issuance to the bank and non-bank stablecoin issuers. On Tuesday, the WH working group on stablecoins released a statement about the issuance, adding that non-bank issuers must have a reserve full of USD to back the stablecoins.
In addition, the reserve must constitute government-authorized securities and other assets as approved by the Office of the Comptroller of the Currency. The statement also reveals that the Federal Deposit Insurance Corporation must hold the cash collateral in a separate insured account.
The introduction of the first draft of the stablecoin regulation bill couldn’t come at a better time. Congress has weighed on the topic and the crypto world in general since 2020 with the aim to adopt regulations that would neither affect their use nor investors.
Moreover, one of the main reasons for creating a regulatory framework is to shield investors from being defrauded and scammed by malicious players encroaching the industry. The decentralized nature of the nascent crypto sector has paved the way for criminals to venture into the space, and it is only by regulations will the industry be rid of these scammers.
Financial Regulators Expresses Desire To Provide Regulatory Oversight
SEC and CFTC heads have been working together to expand oversight of the cryptocurrency industry, given the growing demands of users. However, SEC’s autocratic approach to clean the sector has drawn criticism from various crypto firms like Coinbase and Ripple.
Gotthiemer highlighted the importance of regulating stablecoins and defining the cryptocurrency class. The Congressman admitted to the tremendous value the crypto industry will offer to the economy in the long run, but innovation and consumer protection will be hampered if there’s uncertainty.
According to him, the Innovation and Protection Act will offer more direction and safeguard Americans against predators. Congress had anticipated the bill’s introduction last Tuesday, but some Democrats in the House Finance Committee thought it was wrong timing. Legislators like Maxine Waters still fault the bill, especially in limiting stablecoin issuance to depository entities.
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