A new proposal was released in the US House of Representatives regarding the regulation of stablecoins, a type of cryptocurrency designed to maintain a stable value by being backed by assets or using algorithms to adjust supply based on demand.
The proposal places non-bank stablecoin issuers, such as Tether and Circle, under the supervision of the Federal Reserve, while insured depository institutions seeking to issue stablecoins are overseen by the appropriate federal banking agency. Failure to register can result in imprisonment and fines.
Approval factors include the ability to maintain reserves in US dollars or Federal Reserve notes, technical expertise, established governance, and the benefits of offering financial inclusion and innovation. The proposal also includes a two-year ban on issuing stablecoins not backed by real assets and calls for a Treasury Department study on “endogenously collateralized stablecoins, ” which rely solely on the value of another digital asset.
Additionally, the proposal allows the government to establish standards for interoperability between stablecoins and supports a Federal Reserve study on the issuance of a digital dollar.