REGULATION

US lawmakers introduce new stablecoin regulation proposal, issuer requirements on par with commercial banks

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US lawmakers introduce new stablecoin regulation proposal, issuer requirements on par with commercial banks

U.S. lawmakers released the latest stablecoin regulation draft yesterday, requiring stablecoin issuers to hold a banking license and obtain approval from the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) in order to operate stablecoin businesses. The high operational threshold has sparked discontent among cryptocurrency industry players.

The Latest Stablecoin Regulatory Draft

U.S. Congress members Rashida Tlaib, Jesús "Chuy" García, and Stephen Lynch have jointly introduced a stablecoin regulatory draft called the "Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act." If passed, this draft would require stablecoin issuers such as Facebook (Diem, formerly Libra), Tether (USDT), Circle (USDC), and others pegged to the U.S. dollar to hold a banking license and comply with banking regulations in their regulatory jurisdiction. They would need approval from the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) to operate stablecoin businesses, imposing significant operational thresholds on stablecoin issuers akin to commercial banks.

According to a press release, the main goal of this bill is to protect low to moderate-income groups who have been excluded from traditional banking services. Advocates like Rashida Tlaib hope to prevent cryptocurrency companies from adopting the bad practices of major banks, further marginalizing vulnerable populations. U.S. Congressman Stephen Lynch stated in the press release:

"Stablecoins offer consumers a novel and innovative way to use their money. I believe this technology can be used to make financial transactions more efficient and potentially increase financial inclusion. However, adopting new technologies comes with risks. In the STABLE Act, Congresswoman Rashida Tlaib ensures that our financial regulatory agencies have the necessary tools to protect consumers. We cannot outsource the issuance of U.S. currency to private entities. The STABLE Act ensures that our regulatory agencies will be able to effectively supervise the application of this new technology."

Cryptocurrency Industry Strongly Opposes

However, the cryptocurrency industry has mixed reactions to this bill. Meltem Demirors, Chief Strategy Officer at CoinShares, stated that implementing this bill would have the opposite effect of its intended goal:

"Cryptocurrencies have reduced the service costs for groups that have long been excluded from the banking sector. Increasing compliance costs and imposing regulatory obligations would instead force companies to restrict the use of their services for those who are unprofitable."

Jeremy Allaire, CEO of Circle, the issuer of the USDC stablecoin, also pointed out that the STABLE Act would set back financial innovation in the U.S. Stablecoins fundamentally improve the speed of U.S. and global payments and banking services, providing a good solution for accessibility and cost efficiency. However, burdening cryptocurrency, fintech, and blockchain companies with significant regulatory oversight from the Federal Reserve and FDIC would severely hinder the development of financial innovation.

The founder of Uniswap also commented on the bill:

"If the U.S. wants to protect consumers from high-risk stablecoins, the government might as well issue a USD token that can be used for tax payments. This approach will only harm innovation and leave no room for maneuver. However, in this case, it is positive for Ethereum, Bitcoin, and synthetic currencies."

On the other hand, supporters of the bill, including Rohan Grey, an assistant professor at Willamette University College of Law, cited Circle's CEO's tweet and countered, "Is the purpose of regulation to provide industry participants with what they want?" and "Some people show ignorance of the history of the banking industry as a principle."