US lawmakers introduce the Stablecoin Innovation and Protection Act, defining what qualifies as a "qualified" stablecoin.

U.S. Congressman Josh Gottheimer released a draft discussion of the Stablecoin Innovation and Protection Act yesterday, which clearly defines the conditions that a qualified stablecoin must meet to provide consumers and investors with adequate protection and reduce the risks associated with financial market instability.

"Stablecoin Innovation and Protection Act"

This bill defines what qualifies as a "qualified" stablecoin:

1. Requires all qualified stablecoins to be issued by banks or qualified non-bank stablecoin issuers:

Non-bank issuers must maintain 100% reserve assets, including U.S. dollars, U.S. government-issued bonds such as U.S. Treasury securities, and other assets deemed appropriate by the Office of the Comptroller of the Currency OCC. Additionally, cash collateral must be held in separate Federal Deposit Insurance Corporation FDIC insured accounts.

2. Qualified stablecoins are defined as cryptocurrencies that can be redeemed for U.S. dollars on demand at a 1:1 ratio and are issued by qualified issuers.

Qualified stablecoins are not classified as securities or derivatives.

3. Grants the OCC primary regulatory authority over stablecoin issuers

The OCC will coordinate with other necessary agencies to establish rules on leverage ratios, audit requirements, AML, KYC, redemption requirements, liability management standards, interoperability, and other issues. Additionally, the FDIC will be required to develop a qualified stablecoin insurance fund to manage redemption payments insurance for non-bank issuers.

4. Does not restrict the issuance of other types of cryptocurrencies

The Securities and Exchange Commission SEC and the Commodity Futures Trading Commission CFTC may continue to review cryptocurrencies that may be considered securities and derivatives, as well as "unqualified" stablecoins.

"The development of cryptocurrencies provides tremendous potential for our economy. However, to allow cryptocurrencies to grow and thrive in the United States rather than overseas, we must provide more direction and certainty to the market to promote innovation and protect consumers." said Josh Gottheimer.

All Current Stablecoins Are "Unqualified"

Although Josh Gottheimer's bill is aimed at protecting investors and has established a series of insurance measures to prevent the feared run on current stablecoins, according to its legislative rules, no stablecoin in the current market meets its "qualified" standard, hence new stablecoins will need to be introduced by qualified issuers.

However, whether such "qualified" stablecoins, certified by a single country and subject to various centralized restrictions, will be favored by the current crypto industry remains to be seen, and we will continue to monitor the passage of this bill.