U.S. Lawmakers Attempt to Make Stablecoins Illegal Without Prior Approval

U.S. lawmakers have introduced a bill to the U.S. Congress that would require all stablecoin issuers to secure a bank charter and regulatory approval before issuing digital currencies.

The new bill was introduced by Representatives Rashida Tlaib, Jesús García, and Stephen Lynch in a press release on Wednesday, which claimed the bill is intended to “protect consumers from the risks posed by emerging digital payment instruments”. Dubbed the “Stablecoin Tethering and Bank Licensing Enforcement Act” (STABLE), the bill would make all services connected to stablecoins illegal, unless the businesses behind them receive approval from multiple government bodies. The bill reads:

“It shall be unlawful for any person to issue a stablecoin or stablecoin-related product, to provide any stablecoin-related service, or otherwise engage in any stablecoin-related commercial activity, including activity involving stablecoins issued by other persons, without obtaining written approval in advance.”

If passed, stablecoin issuers will be required to obtain a banking charter, approval from the Feds, FDIC, and bank regulator prior to issuing any stablecoins. Issuers will also need to obtain an FDIC insurance, or keep reserves at the Federal Reserve, to ensure that their digital asset can be easily converted back into U.S. dollars. Companies that only offer services connected to stablecoins will have to follow the “appropriate banking regulations under the existing regulatory jurisdictions”.

The 18-page bill will not only apply to U.S. dollar-pegged stablecoins, but also to stablecoins connected to other national and state currencies. Congresswoman Tlaib went as far as to say that the STABLE Act was designed to prevent stablecoin providers from “repeating the crimes against low- and moderate-income residents of color” that big banks have committed in the past. The Chief Strategy Officer of CoinShares, Meltem Demirors, disagreed with the Congresswoman, arguing that cryptocurrencies lower the cost of servicing “populations that have historically been excluded from the banking sector”.

Demirors was not the only one in the crypto community to express her dissatisfaction with the proposed bill. The CEO and co-founder of Circle, Jeremy Allaire, took to Twitter in an eight-post thread, explaining how this bill could be a “huge step backward for digital currency innovation in the United States”. The developer of the USDC stablecoin recently announced a partnership with Visa, which has agreed to connect its payments network of 60 million merchants to the dollar-backed stablecoin.

Other lawmakers also appear to be against the STABLE Act, with Wyoming House Representative Tyler Lindholm tweeting:

The chances of the bill passing this year are extremely low, as there are only several weeks left before the current Congressional session ends, though it might get re-introduced next year.