US Republicans Competing For Stablecoin Oversight From SEC In New Draft

Key Points:

• The new Republican bill on stablecoins would empower the SEC to empower federal and state banks and credit union regulators.
• The new bill will focus on stablecoins for payments, manage the registration process for each potential stablecoin issuer, and is intended to be a companion document to the US digital asset market regulation law. 
• States can approve stablecoin issuance using their standards, but the bill sets a common standard for state regulators to evaluate projects.

Republicans on the US House of Representatives Financial Services Committee have introduced a new draft of stablecoin regulation, which aims to transfer stablecoin jurisdiction from the Securities and Exchange Commission (SEC) to federal and state banking and credit union regulators.

The new bill no longer involves:

• Algorithmic stablecoins or central bank digital currency research requirements.
• Focusing on stablecoins for payments.
• Managing the application process for individual stablecoin issuers’ potential is intended to be a companion document to the US digital asset market regulation law.

According to the announcement, the latest version will serve as a “starting point” for discussions between House Republicans and Democrats, the Senate, and the White House about stablecoin regulation in the coming months.

The draft stipulates that US states can use their standards to approve stablecoin issuances, but the bill sets the bottom line for state regulators in assessing the project. The bill obliges non-bank stablecoin issuers to regulatory checks that all stablecoins are backed by legal tender or short-term treasury bonds and includes a requirement to report monthly to a public company Certified public accounting firm.

If a stablecoin does not meet these standards, the Fed can suspend the project, even if the state approves it. Issuing stablecoins without regulatory approval can result in criminal and civil penalties, and stablecoin issuers will be subject to anti-money laundering and KYC requirements or other consequences.

Stablecoins must be backed at least one-to-one by fiat or short-term treasury bills. These reserves must be audited monthly by a certified public accountant, signed by the Managing Director. of the issuer, and is criminally liable in the event of known false reporting. If the issuer goes bankrupt, holders of the paying stablecoin will be given priority in compensation. The bill also states that stablecoins are not securities.

Industry advocates believe Gensler attempted to sabotage negotiations between McHenry, Representative Maxine Waters, D-Calif., and the Treasury Department last year for the SEC to continue to take full custody of stablecoins in the US. United States, but a separate source said those talks disputed that. With Republicans in the US House of Representatives and Democrats in the Senate requiring the signature of Democrat Joe Biden, any bill involving digital assets would take bipartisan support to become law.

The draft, made public as negotiations continue on a comprehensive framework for stablecoins, comes amid an SEC investigation into BUSD, a stablecoin shared between the digital asset infrastructure company Paxos number and international cryptocurrency exchange Binance.

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