U.S. Representative Gottheimer Introduces Draft Bill On Stablecoins
U.S. Representative Josh Gottheimer has introduced an early draft of a bill which would set a clear definitions around U.S. dollar-backed stablecoins.
According to a Politico report, New Jersey Democrat Representative Josh Gottheimer has released draft bill that would set clear definitions surrounding regulation of the fast-growing form of cryptocurrency –USD-backed stablecoins.
The draft bill proposes a new “qualified” designation for stablecoins that can be redeemed on demand on a one-to-one basis for U.S. dollars. The qualified stablecoins would only be issued by banks or non-bank institutions that satisfy certain conditions, such as apply to the rules set by the Office of the Comptroller of the Currency.
Qualified stablecoin issuers would have to maintain at least 100% backing in reserve assets, which would take the form of USD or other assets the OCC deems appropriate cash equivalents, such as extremely liquid, short-term U.S. dollar-denominated debt instruments like U.S. Treasury securities.
Gottheimer told Politico in an interview earlier in February that the key motive behind the proposed bill was “harnessing the innovation while ensuring safety and soundness for investors.”
He said:
“Certainty’s the key to leadership, and I’m worried that right now you’ve got Bermuda and the Bahamas and France and other places drawing investors and currencies because we have not acted with the alacrity that we should.”
A great regulatory concern surrounding stablecoins and stablecoin issuers is the quality of their backing and the possibility of “bank runs” that could threaten the stability of the broader financial system. Gottheimer’s bill would require stablecoin issuers to either have to acquire bank charters or hold their reserves in segregated accounts with regulated banks, which would significantly reduce the risks for both the users and the system as a whole but also increase centralization and limit the competition within the space.
According to Gottheimer, Nellie Liang, the undersecretary of the Treasury who’s leading regulatory efforts on the stablecoins, is supportive of his plan when she appeared before the House Financial Services Committee last week. However, several other Representatives, including Republican Tom Emmer and Democrat Gregory Meeks, have raised opposing voices to the President’s Working Group proposal, which, similar to Gottheimer’s draft legislation, was looking to limit stablecoin issuance to banks.
The House Financial Services Committee is expected to decide on stablecoin legislation in the coming months. Although, with two competing bills and geopolitical tensions surrounding Russia and Ukraine, it could take considerably longer any decision to be reached.
