📰 Table Of Contents
Introduction
Senators Cynthia Lummis and Kirsten Gillibrand have collaborated on a new bill aimed at regulating stablecoins in the United States. This proposed legislation seeks to define the operational framework for stablecoins and ensure their compliance with regulatory standards.
Key Provisions of the Bill
- Payment stablecoin issuers must adhere to reserve and operational requirements.
- Issuers are required to establish subsidiaries dedicated to issuing stablecoins.
- Exclusive dealing in dollar-backed tokens is mandated for stablecoin issuers.
Definition of Stablecoins
The bill categorizes payment stablecoins as digital assets pegged to the U.S. dollar, designed for payment and settlement purposes. Issuers must ensure conversion to dollars and refrain from classifying the asset as a security.
Issuer Eligibility and Oversight
Non-depository trust companies registered with the Federal Reserve Board of Governors or depository institutions authorized as national payment stablecoin issuers are eligible to become issuers. Both state and federal regulators will oversee their operations.
Additional Requirements
- Stablecoin issuers must fully back their tokens with reserve assets and disclose the nature of these assets publicly.
- Engagement of a non-depository trust as a custodian, with a requirement for the use of a depository institution as a sub-custodian.
- Prohibition of algorithmic stablecoins that are often undercollateralized.
Limitations and Thresholds
The bill sets a $10 billion limit for non-depository trust institutions issuing payment stablecoins. Once this threshold is exceeded, issuers must become authorized national payment stablecoin issuers, typically including depository institutions.
Industry Landscape
Leading stablecoin issuers like Circle and Paxos are positioned within the regulatory framework outlined by the bill. Circle, with $33 billion in outstanding USDC, does not fall under the depository trust institution category. Paxos, the next largest issuer, operates under a limited-purpose trust charter.
Legislative Progress
Senators Lummis and Gillibrand have been active in introducing legislation related to digital assets. Stablecoin regulation has been a focal point, with efforts to define decentralized finance and establish jurisdiction over crypto markets. While progress has been slow, discussions among key stakeholders indicate potential advancements in stablecoin legislation.
Ian is a cryptocurrency enthusiast blending humor with professionalism. With an engineering background and a storyteller's heart, he simplifies the blockchain world with sharp analysis and a touch of wit. At Cryptowire, he brings his unique perspective to make digital financial innovation accessible to all.
