Non-registration as a stablecoin issuer may lead to imprisonment of up to five years and a fine of $1 million, while issuers outside the US must obtain registration to conduct operations within the country.
A draft bill has been released on the House of Representatives’ document repository, outlining a regulatory framework for stablecoins in the United States, just ahead of an upcoming hearing on April 19th. Under the draft bill, the Federal Reserve would be responsible for overseeing non-bank stablecoin issuers, such as Tether and Circle, which respectively issue the USDT and USDC cryptocurrencies, designed to offer investors price stability through asset backing or algorithmic supply adjustments.
The legislation differentiates between insured depository institutions and non-bank institutions, placing each under appropriate supervision, and non-registration could result in a fine of $1 million and imprisonment of up to five years. Non-US issuers would also need to register to operate within the country.
Approval considerations include the capacity of the applicant to uphold reserves for stablecoins, backed by U.S. dollars or Federal Reserve notes, Treasury bills maturing in 90 days or less, repurchase agreements maturing in 7 days or less, supported by Treasury bills with a maturity of 90 days or less, in addition to deposits in central bank reserves.
In addition, stablecoin issuers must display their technical proficiency and established governance, while highlighting the potential benefits of offering financial inclusion and innovation through stablecoins.
Circle’s CEO, Jeremy Allaire, shared on Twitter that there is a need for bipartisan support for legislation that ensures the safe issuance, backing, and operation of digital dollars on the internet. Cointelegraph reached out to Tether but did not receive a prompt response.
Furthermore, the proposed legislation includes a two-year moratorium on issuing, creating, or originating stablecoins that are not backed by tangible assets. It also mandates that the Treasury Department conducts a study on “endogenously collateralized stablecoins.”
The document defines endogenously collateralized stablecoins as relying exclusively on the value of another digital asset created or maintained by the same issuer to maintain a fixed price.
The proposed legislation also enables the U.S. government to set norms for interoperability between stablecoins, in addition to mandating that the Congress and the White House provide support for a Federal Reserve study on digital dollar issuance.
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