There have been suggestions for a prospective framework for stablecoin regulation. With the law, assets like TerraUSD may be illegal for two years. The Financial Stability Oversight Council will convene on September 23 under the direction of U.S. Treasury Secretary Janet L. Yellen.
In a report by Bloomberg, the bill’s text indicates that issuing or manufacturing further stablecoins would be illegal.
Several Months of Debate on A Stable Cryptocurrency
Terra USD (UST), an algorithmic stablecoin, was unpegged from the dollar earlier this year. The catastrophe that disrupted the ecological system’s burning and minting process has accounted for over $40 billion. To that end, stablecoins that claim to have a fixed exchange rate would violate the requirements.
Such stablecoins usually rely wholly on the value of another digital asset created by the same creator to maintain their fixed price.
The law would purportedly prohibit corporations from merging client monies. The prohibitions include cash, private keys, stablecoins, and corporate assets.
The Financial Stability Oversight Council will decide on stablecoin legislation during the meeting on September 23. U.S. Treasury Secretary Janet L. Yellen will preside over the meeting via videoconference. But Brad Sherman, one of the committee’s top Democrats, told Bloomberg that there is not yet a date for the markup.
The Federal Reserve and Other Regulators’ Expanded Responsibilities
According to the source, the proposal would mandate a study of tokens like Terra by the Treasury. The study will be in conjunction with the Office of the Comptroller of the Currency, the Federal Reserve, the Securities and Exchange Commission, and the Federal Deposit Insurance Corporation.
Simultaneously, Maxine Waters (D) and Patrick McHenry (R) have been trying to agree on stablecoin legislation. Maxine Waters is the chairperson of the House Financial Services Committee. Patrick McHenry is a ranking member.
In November 2017, the President’s Working Group for Financial Markets (PWG) released research on stablecoins. The study was in collaboration with the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC).
Secretary of the Treasury Janet Yellen indicated that Stablecoins might offer good payment choices if they were well-designed and subject to adequate regulation. However, people and the system are in danger without proper supervision.
All Hands-on Deck
Since then, a coalition of Democrats and Republicans in the United States Congress has been discussing new legislation to create stablecoin regulations. It is mainly because Tether has received much attention, the biggest stablecoin, for its reserve disclosures.
The plan from the previous year called for stablecoin issuers to be insured depository institutions or operate similarly to banks. According to reports, the new laws will make it possible for both banks and non-banks to issue stablecoins. Bloomberg notes that the Federal Reserve would establish a process for evaluating applications from non-bank issuers.