A U.S. lawmaker has introduced a bill that could bring an end to the era of unregulated stablecoin use in the country. Known as the STABLE Act, it will treat stablecoin issuers as banks, requiring them to obtain a banking charter and abide by all the current banking regulations.
The Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act was introduced in U.S. Congress by Michigan Democrat Rep. Rashida Tlaib, along with Reps. Jesús Garcia and Stephen Lynch. In a press release, the lawmakers said they were seeking to protect consumers from risks posed by emerging digital payment systems such as Facebook’s Libra and stablecoins.
The STABLE Act will require that any stablecoin issuer:
- Obtains a banking charter.
- Follows the appropriate banking regulations under the existing regulatory jurisdictions.
- Notify and obtain approval from the Federal Reserve, the Federal Deposit Insurance Corporation and other banking regulator six months prior to issuing the stablecoin.
- Obtain FDIC insurance or maintain reserves at the Fed to ensure that its stablecoins can be readily converted into USD on demand.
Tlaib described the Act as “getting ahead of the curve” in protecting consumers against digital currency crimes. She believes that because of the pandemic, U.S. citizens have been making riskier financial decisions. As such, it’s the responsibility of Congress to shield them from dangers that can stem from unregulated stablecoin issuance.
Garcia reiterated the stance, adding, “That’s why I’m proud to introduce the STABLE Act […] to ensure that new financial tools like stablecoins have proper oversight and protections. Congress must ensure that new financial technologies and payment tools do not prey on vulnerable users. The STABLE Act does just that—it embraces innovation while also protecting consumers.”
The legislators singled out Facebook’s Libra as one of the stablecoins that pose great danger if left unregulated. They stated that Facebook has attempted to take advantage of the financial exclusion and gap in the market. As it was reported, Facebook intends on launching Libra in 2021 despite the continued regulatory hurdles.
The three also cited JP Morgan, Apple and PayPal/Venmo as some of the other players who have dipped their feet into the stablecoin industry.
Many in the digital currency industry have voiced their criticism at the STABLE Act. Jeremy Allaire, the CEO of Circle Internet Financial took to Twitter where he termed the Act as “a huge step backwards.” Allaire’s company is the issuer of the USD Coin (USDC) stablecoin, the second largest after Tether.
1/8 The STABLE Act would represent a huge step backwards for digital currency innovation in the United States, limiting the accelerating progress of both the blockchain and fintech industry.
— Jeremy Allaire (@jerallaire) December 2, 2020