New Bill Proposes Federal Reserve Oversight of Stablecoins in the US
The House of Representatives in the United States has published a draft bill for stablecoins just days before a hearing on the topic scheduled for April 19.
The bill places non-bank stablecoin issuers, such as Tether and Circle, under the Federal Reserve’s oversight.
Stablecoins are a digital currency category that aims to maintain a consistent value through asset backing or supply adjustments based on market demand. As per the report, insured banks would be monitored by Federal banking agencies, while the Federal Reserve would oversee non-bank entities.
Noncompliance with registration requirements could lead to imprisonment for up to five years and a fine of $1 million. Foreign issuers are also required to register to operate within the United States.
To obtain approval, applicants must maintain reserves to back stablecoins with US dollars or Federal Reserve notes, Treasury bills, repurchase agreements with Treasury bills, and central bank reserve deposits.
In addition, they are required to exhibit technical proficiency, a well-established management system, and the advantages of extending financial inclusivity and innovation through stablecoins.
Circle’s CEO, Jeremy Allaire, tweeted that there was a need for “deep, bi-partisan support” for laws that ensure digital dollars on the internet are safely issued, backed, and operated.
The proposed legislation prohibits generating or distributing stablecoins that lack support from tangible assets for two years. Additionally, it mandates that the Treasury Department performs research on stablecoins that are collateralized endogenously and authorizes the US administration to set guidelines for stablecoin interoperability.
The document also demands that the Federal Reserve conducts a study on the release of a digital version of the US dollar.