A discussion draft of federal stablecoin legislation has been released by a member of Congress, a move that comes the morning of a hearing on the subject in the US Senate.
According to an announcement from the office of Congressman Josh Gotthiemer (D-NJ), the Stablecoin Innovation and Protection Act is aimed at "defining qualified stablecoins, carving qualified stablecoins out from more volatile cryptocurrencies, and putting appropriate protections in place for consumers and investors."
"The legislation defines qualified stablecoins as a cryptocurrency redeemable on demand on a one-to-one basis for U.S. dollars and issued by one of two qualified issuers, either an insured depository institution such as a bank or a non-bank qualified stablecoin issuer. The bill will help protect against systemic risk, fraud, and illicit financing," according to a summary shared with The Block. A copy of the legislation can be found here.
One of the bill's chief components, reflecting a recommendation contained in a December report from a White House-led working group on stablecoins, is to limit issuance to "a bank or a non-bank qualified stablecoin issuer" per Tuesday's statement.
"The non-bank issuer must maintain at least 100% reserve assets consisting of U.S. dollars, U.S. government-issued securities such as U.S. Treasuries, and other assets as deemed appropriate by the Office of the Comptroller of the Currency (OCC). The cash collateral must be held in a segregated Federal Deposit Insurance Corporation (FDIC)-insured account," the summary states.
The timing is notable as Congress continues to weigh the subject of stablecoins and, more broadly, crypto regulation, both at the legislative level as well as at agencies like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Leaders from both agencies have expressed a desire to expand their respective oversight of the US crypto sector.
“The expansion of cryptocurrency offers tremendous potential value for our economy. But for cryptocurrency to grow and thrive here in the United States, instead of overseas, we must provide more direction and certainty to the marketplace to help boost innovation and protect consumers,” Gottheimer said in a statement. “That’s why I’m releasing the Stablecoin Innovation and Protection Act to encourage cryptocurrency innovation in the United States, define qualified stablecoins, and protect Americans against bad actors like predatory entities and terrorists."
Sources close to the House Financial Services Committee had anticipated that Gottheimer would introduce this bill last week on the same day of its hearing with Treasury official Nellie Liang. However, other Democrats on the committee didn't seem intent on making this bill the focus of their planned legislative push around stablecoins. Many, including Chairwoman Maxine Waters, seemed to object to the concept of restricting stablecoin issuance to insured depository institutions — the central plank of the PWG report and one echoed in Gottheimer's draft bill.