Republicans Release New Draft of Stablecoin Regulation Legislation

Republicans on the House Financial Services Committee have released a new draft of legislation aimed at regulating stablecoin issuers. The move is part of an effort to restart negotiations with Democrats that stalled last fall on an issue that all sides agree is ripe for regulation. The new draft bill is half the length of the previous draft, released last fall, and is closely tailored to focus on rules governing the registration process for individual prospective stablecoin issuers.

What Are Stablecoins?

Stablecoins are a type of cryptocurrency issued by private entities and designed to maintain a stable value pegged to a traditional asset, like the U.S. dollar or a short-term Treasury bill. They are not used in brick-and-mortar commerce or typically accepted as payment for goods. However, they have become very popular on crypto platforms.

Features of the Bill

The bill contains many of the features of the September version, such as the requirement that payment stablecoin issuers be approved and regulated by either a “federal payment stablecoin regulator” or “a registered State qualified payment stablecoin issuer.” It also clarifies and updates U.S. law to confirm that stablecoins are not securities and, by extension, should not be regulated by the SEC.

Role of State Regulators

The new draft bill envisions a larger role in the market for state regulators, despite the fact that the majority of states do not have a stablecoin regulatory framework in place yet. The latest version was crafted by committee Republicans and is described by GOP aides as a “starting point” for conversations about stablecoin regulation with House Democrats, the Senate, and the White House in the coming months.

The digital assets market overall is believed to be worth more than $180 billion and operates with no specific legislative framework. This has led to what lawmakers describe as a turf war between regulators, with the Commodities Futures Trading Commission seeking to regulate stablecoins as commodities and the Securities and Exchange Commission seeking to regulate them like securities.