MP Josh Gotheimer, co-chair, meeting on problem solving (D-NJ).
Adam Jeffery CNBC
New Jersey MP Josh Gotheimer on Tuesday unveiled an early bill aimed at placing definitions around stablecoins that critics consider prone to manipulation, bad actors and a collapse as a result of insufficient reserve capital.
A draft discussion released by Gotheimer’s office on Monday proposes to designate certain digital currencies as “qualified” stablecoins if they can be redeemed on a one-to-one basis for US dollars.
Qualified stablecoins may be issued by a federal-backed bank or a non-banking bank that agrees to maintain at least 100% of reserve assets consisting of US dollars, US debt or any other assets that the Currency Controller Concert deems necessary collateral.
“I don’t think we need to stifle innovation in the cryptocurrency market,” Democrat Gotheimer said Monday afternoon.
Gotheimer’s legislation, which still requires contributions from Capitol Hill and the crypto industry, is likely to be the first of many attempts to structure a new market by Congress and the Biden administration.
Gotheimer said Nelly Liang, deputy finance minister in charge of the regulatory effort, backed his plan when she addressed the House Financial Services Committee last week.
“We have worked very closely with the Treasury and the Blockchain Association and many businesses in the space,” he added.
Stablecoins issued by companies such as Tether and Circle Internet Financial have become popular in recent years. Proponents say that stablecoins combine the ease and speed of more volatile cryptocurrencies with the stability of national currencies such as the U.S. dollar.
Although many stablecoin issuers keep a pool of dollars to back up the value of a digital token, it is not always clear whether they can guarantee 100% of requests to repay traditional fiat currencies. Some politicians are concerned that a surge in requests for redemption or “launch” of stablecoin could lead to the issuer’s bankruptcy and insolvency.
“We welcome the leadership of a representative of Gotheimer, who has taken a thoughtful, risk-based approach to stablecoin innovation in the United States and how it can fit into federal regulatory frameworks,” said Dante DiParte, Circle’s chief strategic officer. email. “Supporting banking and non-banking innovation in the payment system is key to long-term competitiveness and a broad choice of how dollars are moving in the 21st century.”
Gotheimer’s bill comes at a time when Washington is trying to identify and regulate cryptocurrencies.
In November, the Biden administration called on Congress to pass a number of pieces of legislation and work with other regulators to make sure that stablecoins do not pose a systemic risk.
In particular, the President’s Working Group on Financial Markets proposed limiting the issuance of stablecoins to banks insured by the Federal Deposit Insurance Corporation to ensure ongoing supervision, prudential standards and, if necessary, access to the government’s safety net.
However, industry representatives rejected this recommendation and complained that some of the world’s most popular stablecoins are produced by firms that are not considered banks. Democrats and Republicans in the House of Representatives and Senate are working hard to develop cryptocurrencies in light of the working group’s report. Senator Cynthia Lamis, R-Vayo, is expected to present a major crypto bill at some point this month.
Between competing bills, more urgent domestic priorities, and shaky geopolitics, lawmakers will be able to gather enough support for any bill to send it to President Joe Biden for signature.