The Stablecoin Bill would allow states to regulate crypto
Cryptocurrency’s go-ahead landscape is reaching a critical regulatory tipping point.
And it could be stablecoins, the backbone of the cryptocurrency economy, that help chart a clear path forward.
This, as Republican lawmakers on the House Financial Services Committee unveiled their version of a new draft stablecoin bill on Monday (April 24), following a contentious debate on April 19 over an older proposal.
The GOP document makes several changes, including giving state regulators more power to charter stablecoin issuers, which New York Department of Financial Services (NYDFS) Superintendent Adrianne A. Harris had pushed for, as well as more generally limiting the bill’s focus, including excluding algorithmic stablecoins.
Under the original bill, stablecoin issuers, which include both banks and non-banks, had to register with the Federal Reserve even if they had obtained government approval. The latest iteration still allows the Fed to take final enforcement action against issuers if individual states fail to do so as recommended.
Importantly, the Republican bill includes a proposed confirmation that stablecoins are not securities and therefore should not be regulated by the Securities and Exchange Commission (SEC).
GOP lawmakers have previously sparred with SEC Chairman Gary Gensler over his enforcement-as-policy approach to the crypto sector and frequent claims that the majority of tokens are securities.
Earlier this year, the SEC sent a Wells notice to stablecoin issuer Paxos, alleging that the Binance-branded BUSD stablecoin was an unregistered security.
“The SEC has forced players in the digital asset market into regulatory frameworks that are neither compatible with the underlying technology nor applicable,” a group of Republican lawmakers wrote to Gensler.
“It is the law; it’s not a choice,” Gensler has repeatedly said about the need for crypto firms to register with his agency.
The GOP’s new stablecoin bill is scheduled to be debated Thursday (April 27) as part of a congressional hearing held by the Subcommittee on Digital Assets, Financial Technology and Inclusion titled “The Future of Digital Assets: Identifying the Regulatory Gaps in Digital Asset Market Structure .”
Proving that crypto has value beyond speculation
In recent weeks, questions about the status and regulation of digital assets and the sector’s market structure have become prominent around the world.
“Clarity in the regulations is really instrumental in creating suitable railings so that [the industry] can get the right innovations in place around payments so they can flourish,” Gavin Michael, CEO of crypto company Bakkt, told PYMNTS on April 17.
US policy is already catching up with Europe. EU lawmakers voted 517-38 on Friday (April 20) in favor of a crypto-licensing framework, the Markets in Crypto-Assets (MiCA), becoming one of the first jurisdictions in the world to introduce a comprehensive set of rules surrounding crypto-assets and their use by them. .
“This puts the EU at the forefront of the token economy,” said Stefan Berger, lead MEP for the MiCA regulation, adding that the legal framework, “brings a competitive advantage to the EU. The European crypto-asset industry has regulatory clarity that does not exist in countries like the United States.”
See also: Bridging the cryptocurrency divide
MiCA offers a defined path to regulatory approval for crypto firms, and the framework gives stablecoins specific classifications depending on the reserves they are backed with.
The EU’s new policy, which will come into force over the next two years, derives many of its rules and requirements from traditional finance, including capital requirements and transparency.
MiCA requires what it calls “significant” stablecoins, or those with 10 million users a year or more on average, to be monitored by the European Banking Authority. These stablecoin issuers will also be expected to maintain a capital of at least 3% of reserves. Violations of MiCA can cost up to 15% of annual turnover.
Many industry leaders have supported the landmark legislation.
“We are ready to make adjustments to our business over the next 12-18 months to be in a full position compliance” tweeted Changpeng Zhao, CEO of the world’s largest crypto exchange, Binance.
Binance has long faced regulatory investigations and problems in the United States due to concerns regarding the legality of its business.
American crypto exchange Coinbase also tweeted that MiCA’s passage represented an “important moment for crypto regulation.”
Coinbase recently escalated its domestic battle with the SEC, filing a legal challenge on Monday to have the SEC “propose and adopt rules to govern the regulation” of digital assets.
Reached by PYMNTS, the SEC declined to comment.
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