Up to five years in jail and a $1 million fine are possible penalties for failing to register as a stablecoin issuer. Issuers outside the U.S. must register to conduct business there as of the new stablecoin legislation.
A few days before an April 19 hearing, a new draught bill establishing a framework for stablecoins in the U.S. was posted in the House of Representatives document repository. The decree gives the Federal Reserve control over non-bank New stablecoin legislation issuers such as cryptocurrency companies Circle and Tether, which respectively issue Tether and USD Coin.
A subset of cryptocurrencies known as stablecoins aims to provide investors with price stability by being backed by certain assets or employing algorithms to change their supply in response to demand. With the launch of the BitUSD in 2014, stablecoins were first presented.
The paper states that while non-bank entities would be under the Federal Reserve’s jurisdiction, insured depository institutions intending to issue stablecoins would be supervised by the relevant Federal banking regulator. A $1 million punishment and up to five years in jail could be imposed for failure to register. Issuers from outside the U.S. would need to register to conduct business there.
The applicant’s capacity to keep reserves backing the stablecoins in the form of U.S. dollars or Federal Reserve notes, Treasury bills with a maturity of 90 days or less, repurchase contracts with a maturity of 7 days or less backed by Treasury bills with a maturity of 90 days or less, as well as central bank reserve deposits, are among the criteria for approval.
Issuers must also show that they have established governance, technical know-how, and the advantages of using stablecoins to provide financial inclusion and innovation.
“There is the need for deep, bipartisan support for laws that guarantee that digital dollars on the net are safely issued, backed, and operated,” stated Circle CEO Jeremy Allaire on a Twitter thread.
The proposed new stablecoin legislation also includes a two-year prohibition on issuing, generating, or originating stablecoins not backed by actual assets. It also states that the Treasury Department will investigate “endogenously collateralized stablecoins.”
Endogenously stablecoins, according to the document’s definition, “relies only on the value of another digital asset created by the same developer to maintain the fixed price.”
The law also allows the U.S. government to set stablecoin interoperability standards. Additionally, it establishes that a Federal Reserve study on creating a digital dollar would have the approval of both Congress and the White House.