The proposed legislation being discussed by the House Financial Services Committee criminalizes stablecoins issued without due consent.
The Congressional Stablecoins Bill requires the Federal Reserve system and state banking regulators to approve any stable currency plans by non-bank entities before they are legally issued.
Media reports claiming access to the bill on Wednesday said state regulators will have to register with the Federal Reserve within 180 days to continue their operations legally.
In July, CryptoPotato reported that the stable currency bill had been delayed for more than a month due to a last-minute change proposed by Treasury Secretary Janet Yellen. It argued that the legislation should provide for separation of clients’ assets from portfolio trustees to maintain them in a bankruptcy scenario.
In June, Japan passed a similar bill recognizing stablecoins as digital funds to be linked to yen or other legal tender.
Algo Stablecoins will be banned
New stablecoins backed by assets created by the same exporters or “informally secured stablecoins” will not be allowed at least for the next two years. Any existing stable currencies will be required to change their business model and obtain new approval from the competent authorities within two years.
Stationary currencies issued without the due consent of the designated regulators will be illegal and punishable by up to five years’ imprisonment and a fine of $1 million. The bill envisages that such cryptocurrencies will be guaranteed through cash or high-liquidity assets such as Treasuries.
The draft legislation aims to create a regulatory framework around stablecoins and asks the Federal Reserve to study the economic impact of the US digital dollar (CBDC). It also mandates a study on stablecoins in consultation with the Fed, the Federal Deposit Insurance Company, the OCC, and the Securities and Exchange Commission.
Banks need regulators’ approval
Banks and other traditional financial institutions will need the approval of federal banking regulators – the Office of the Currency Controller (OCC) and the Federal Deposit Insurance Company – according to media reports.
It also addresses the issue of interoperability of stable currencies and gives authority to establish standards in federal bankers and State monitors. The bill aims to align the asset and accounting standards of stationary currencies with banks and credit unions.
The bill prohibits mixing customers’ funds and keys with stablecoins and other assets so that users can quickly recover their investments in the event of insolvency or bankruptcy.
May come to vote at any time
The bill is being negotiated between House Financial Services Committee Chairman Maxine Waters and Representative Patrick McHenry. There is still the possibility of changes to it because it has not yet been signed by Waters and McHenry.
Although the coding date has not yet been set, the committee could vote on the bill as early as next week because only time is left until the end of this year to consider it, and the upcoming midterm elections leave little room to delay further.