A new U.S. Congressional bill would require stablecoin issuers to secure bank charters and secure regulatory approval prior to circulating any stablecoins.
U.S. Representatives Rashida Tlaib (D-Mich.), Jesús “Chuy” García (D-Ill.) and Stephen Lynch (D-Mass.) introduced the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act on Wednesday, writing in a press release that it would focus on regulating stablecoins, naming the stablecoin of the Facebook-led Libra project (since renamed Diem) as one example.
“Digital currencies, whose value is permanently pegged to or stabilized against a conventional currency like the dollar, pose new regulatory challenges while also represent a growing source of the market, liquidity, and credit risk,” the press release said.
The 18-page bill would specifically require stablecoin issuers to obtain a banking charter; require approval from the Federal Reserve, Federal Deposit Insurance Corporation and bank regulator to issue a stablecoin; require those same entities to conduct an ongoing analysis of any systemic risk; and require issuers to have FDIC insurance or maintain reserves for easy conversion back into U.S. dollars.
This would apply to stablecoins pegged to other national or state currencies, the bill said.
The press release also mentioned a letter that the sponsors and cosponsors had previously sent to Acting Comptroller of the Currency Brian Brooks, that questioned the regulator’s focus on the digital asset space. Specifically, the lawmakers took issue with OCC interpretive letters on banks providing custody services to stablecoin issuers and other crypto platforms.
A number of stablecoin issuers currently operate in the U.S. without banking charters, including the CENTRE consortium (which are composed of Circle and Coinbase), Gemini and Paxos.