How the stables have turned: US Bill seeks to mandate 100% cash reserves for stablecoins
A new bill recently tabled to U.S. Congress has sought to provide much needed legislative clarification on stablecoins. Briefly, stablecoins are a form of cryptocurrency backed by an asset class which does not oscillate as much as cryptocurrency that is backed by some asset class which does not oscillate as much as cryptocurrencies usually other cryptocurrencies usually do.
The new Bill allows financial and non-financial institutions to issue stablecoins, however, imposes a mandate on them to have their digital assets backed with reserve assets consisting of U.S. dollars and government issued securities.
The proposed legislation would define qualified stablecoins, and distinguish qualified stablecoins from more volatile cryptocurrencies. The Bill also vests oversight of the mandate with the Office of the Comptroller of the Currency; as well as placing a mandate on non-financial institution stablecoin issuers to hold the reserve collateral in a separate Federal Deposit Insurance Corporation-insured account.
Importantly, the proposed legislation does not exclude the Securities and Exchange Commission or the Commodities Futures Trading Commission from examining stablecoins in order to discover non-qualified stablecoins.
The official press-release quotes Kristin Smith – Executive Director of the Blockchain Association:
Rep. Gottheimer's bill represents the most comprehensive and well-thought-out stablecoin legislation we've seen to date. We are pleased that Congress is taking a proactive approach by engaging with stakeholders in industry and government as they consider the best path for stablecoin regulation. We thank Rep. Gottheimer for his leadership in this area and look forward to continuing to work with him on these issues going forward.
Whilst the bill is a product of recent lengthy discussions and debate among U.S. Congressional legislators, the urgent need for stablecoin legislation has been stressed by U.S. Treasury. Per U.S. Treasury Undersecretary for Domestic Finance, Nellie Liang:
This is an urgent issue given the rapid growth of this market.
With the recent increase in discussions among members of the Australian legislature, it may only be a matter of time before similar legislation is considered domestically.