Three House Democrats have unveiled a new piece of legislation focused on the regulation of stablecoins issuers and companies that provide stablecoin-related services.
The draft bill, if approved, "would protect consumers from the risks posed by emerging digital payment instruments, such as Facebook’s Libra and other Stablecoins currently offered in the market, by regulating their issuance and related commercial activities," according to a statement published by the office of Rep. Rashida Tlaib.
The bill would notably mandate that "any prospective issuer of a stablecoin to obtain a banking charter" and "that any company offering stablecoin services must follow the appropriate banking regulations under the existing regulatory jurisdictions." The legislation was put forward by Tlaib along with Reps. Stephen Lynch and Jesús García — all of whom signed a letter that took aim at U.S. Comptroller Brian Brooks for his focus on cryptocurrency-related issues earlier this month.
The bill effectively declares that stablecoins are a kind of deposit under federal law, as noted by Rohan Grey, an assistant professor at Willamette Law.
According to the text of the bill, the draftees appear to be casting a wide regulatory net to cover those that issue stablecoins or provide business services related to them.
As the text states:
"It shall be unlawful for any person to issue a stablecoin or stablecoin-related product, to provide any stablecoin-related service, or otherwise engage in any stablecoin-related commercial activity, including activity involving stablecoins issued by other persons, without obtaining written approval in advance, and on an ongoing basis, from the appropriate Federal banking agency, the Corporation, and the Board of Governors of the Federal Reserve System."
“From the OCC to the Federal Reserve to those peddling stablecoins, the protections the STABLE Act would make possible are more needed than ever amid a pandemic that will breed riskier financial decisions out of necessity because our federal government continues to fail us all by not providing adequate relief legislation. I thank Congressman García and Chairman Lynch for co-leading this important effort to see these protections made a reality," Tlaib said in a statement.
"We cannot outsource the issuance of American currency to private entities and the STABLE Act guarantees that our regulators will be able to effectively oversee the application of this new technology," Lynch said in a statement.
It should be noted that the legislation's filing comes as the current Congressional session approaches its end point. A new Congress will be seated in January, after which time the bill — if formally submitted — would need to be refiled.
When reached for comment, Kristin Smith of the D.C.-based Blockchain Association told The Block that "[w]hile we have had sustained and constructive discussions with Representative Tlaib’s office on this issue, we disagree with the perspective of this legislation and oppose this bill."
"It would strengthen the position of the most powerful financial institutions, while overlooking two core promises of decentralized networks: the chance to put more power in the hands of individual consumers and to catalyze innovation across payments and other financial services," she continued.
Jeremy Allaire, the CEO of Circle — which is a backer of the stablecoin USDC-issuing Centre Consortium — said in a Twitter post: "The STABLE Act would represent a huge step backwards for digital currency innovation in the United States, limiting the accelerating progress of both the blockchain and fintech industry."
This headline of this report has been updated.
The draft bill can be found below: