Republican lawmakers on the House Financial Services Committee have presented a discussion draft of legislation aimed at regulating stablecoin issuers. The draft, referred to as a “starting point,” is intended to revive negotiations with Democrats on stablecoin regulation. Last year, House Democrats negotiated a bill that would subject stablecoin issuers to Federal Reserve oversight, with a view to developing reserve requirements that offer security to customers in case of insolvency.
Stablecoins, which are issued by private entities, have become popular on crypto platforms. The value of this type of crypto is pegged to a traditional asset like the US dollar or a short-term Treasury bill. The stable digital assets market, which currently operates without a specific legislative framework, is believed to be worth $180 billion.
The Republicans’ new bill, which is approximately half the length of the previous one, focuses on rules governing stablecoin issuers’ registration and approval process. It proposes that stablecoin issuers be approved and regulated by either a “federal payment stablecoin regulator” or “a registered State qualified payment stablecoin issuer.” Republicans claim that to be approved as an issuer, a stablecoin provider must meet reserve capital requirements and provide monthly disclosures of their reserve portfolios.
Republicans bill to confirm that stablecoins are not securities
The Republicans’ bill also updates and clarifies the law to confirm that stablecoins are not securities, and hence, should not be regulated by the Securities and Exchange Commission. This settles a controversy in the ongoing debate on whether tokens are securities and commodities to determine the overseeing agency. It is likely that the regulating agency will be either the SEC or the Federal Trading Commission (FTC).
The House Financial Services Committee has expressed concerns about the lack of regulation in the crypto space and is seeking to impose order on the industry through the discussion bill. However, the latest version of the proposal has no Democratic support.
The GOP aides have described the bill as a “starting point” for conversations with House Democrats, the Senate, and the White House on stablecoin regulation. As negotiations proceed, it will be interesting to see whether the two sides can come to an agreement on how to regulate stablecoin issuers and how to ensure that customers are protected in the event of insolvency.
