How to weigh the pros and cons? Interpretation of the latest US stablecoin regulatory bill

Editor's Note: This article comes fromGolden Finance, reprinted by Odaily with authorization.

Editor's Note: This article comes from

Golden Finance

Golden Finance

, reprinted by Odaily with authorization.

Members of the U.S. Congress have proposed a new bill called the Stablecoin Network Sharing and Bank License Enforcement Act, which would require stablecoin issuers to obtain a banking charter and obtain regulatory approval before issuing stablecoins.

The bill was introduced by U.S. Congressional Representatives Rashida Tlaib (Michigan), Jesús “Chuy” García (Illinois) and Stephen Lynch (Maryland), who noted that the bill would focus on regulating stablecoins, especially Facebook-led The Libra stablecoin project (currently renamed Diem), which proposes a number of regulatory requirements, including:

1. The stablecoin issuer must obtain a banking license;

2. The issuer of the stable currency must obtain the approval of the Federal Reserve, the Federal Deposit Insurance Corporation of the United States and the banking regulator to issue the stable currency;

3. Stablecoin issuer entities must conduct continuous analysis of all systemic risks;

4. The stablecoin issuer must purchase insurance from the Federal Deposit Insurance Corporation of the United States and keep sufficient reserves for easy conversion to US dollars.

In the 18-page “Stablecoin Network Sharing and Bank License Enforcement Act,” it states:

"The permanent anchoring (or stabilization) of digital currency prices to traditional fiat currencies such as the U.S. dollar means new regulatory challenges, and this will also lead to increased market, liquidity and credit risks."

Rohan Gray, an assistant professor at the Willamette University School of Law, believes that the Stablecoin Network Sharing and Bank License Enforcement Act actually defines deposits "based on the form of digital currency". It is a form of deposit that originated on the Internet. Rohan Gray explained:

"Any service provider and entity that wants to issue money or deposits or something like that should be regulated like a financial institution offering deposit services."

It is worth mentioning that the sponsors and co-sponsors had previously sent a letter to Brian Brooks, acting director of the U.S. Office of the Comptroller of the Currency, which questioned the regulator’s focus on digital assets. Lawmakers also sent explanatory letters to banks that provide custody services to issuers of stablecoins and other cryptocurrencies.

In July, the U.S. Office of the Comptroller of the Currency opened the door for federal savings associations and national savings banks that want to hold cryptocurrencies on behalf of their clients. The regulator issued a proclamation on July 22 allowing national banks and federal savings associations of all sizes to custody cryptocurrencies, stating that such custodial services are a “modern form” of traditional banking activities related to custodial services. .

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How will the new bill affect the cryptocurrency industry?

Rashida Tlaib said that the reason for introducing this bill is mainly to prevent cryptocurrency service providers from committing crimes against low- and middle-income residents, and to better protect individual investors. So far, many stablecoin issuers in the United States have not obtained banking licenses, such as the CENTER consortium formed by Circle and Coinbase, Gemini Exchange and Paxos, and algorithmic stablecoins such as Basis.Cash, and DAI Such a collateralized stablecoin.

However, the cryptocurrency industry does not seem to support this new bill. For example, Circle CEO Jeremy Allaire said the bill, if passed, would limit innovation and take a big step back for the cryptocurrency industry. He explained:

“Non-bank fintechs offer huge innovations for many small, underfunded businesses, but the new bill will force cryptocurrency companies, fintechs, and blockchain companies to shoulder the enormous regulatory burden of the Federal Reserve and the FDIC.” .This is inconsistent with our goal of financial innovation. In stablecoins and stablecoin-based payment methods, we hope to support innovation in a fair and inclusive way. A more effective stablecoin regulatory approach may come from other types of regulation.”

Kristin Smith, executive director of the Blockchain Association, also strongly opposed the new bill, stating:

“While we have had ongoing and constructive discussions with Congress Representative Rashida Tlaib’s office on the issue of stablecoins, we disagree with the point of view of the legislation and oppose the bill as it would continue to strengthen the position of large financial institutions while at the same time would ignore two core promises of the decentralized web: 1. to put more power in the hands of individual consumers and 2. to foster innovation in payments and other financial services.”

In contrast, Kristin Smith sees the OCC’s guidance on stablecoins as an “example of progress.” According to Jonathan Gould, Senior Deputy Comptroller and Chief Advisor of the U.S. Office of the Comptroller of the Currency, the regulatory agency has actually been studying the cryptocurrency industry since 2018 (or even worse). Offering services to crypto companies in addition to custodial services opens the door, but banks are unlikely to start offering both services immediately, as banks still need to make sure they have proper risk management practices in place, otherwise, before they can actually offer these services, It is imperative to ensure legal readiness.

The U.S. Office of the Comptroller of the Currency believes that institutions that have long been engaged in safe deposit and custody activities can provide cryptocurrency custody services, which is a form of authorization that allows national banks to perform traditional banking operations electronically, including credit capabilities and non-credit capabilities. Banks that provide cryptocurrency custody in a non-trustworthy capacity essentially provide custody for cryptographic keys to control and transfer customers' cryptocurrencies.