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US Congress rejects stablecoin regulation proposal

 


In the US, the Treasury wants to regulate the issuance of stablecoins more tightly, but this is met with opposition in the House of Representatives.


The US Treasury Department had drafted a new stablecoin law and presented it in a hearing before the US House of Representatives on February 8th . But the draft met with rejection there. The undersecretary of the Treasury Department for domestic business, Nellie Liang, is considered the driving force behind the drafting. Their intention is to limit stablecoin issuance to insured depository institutions (IDIs).


The IDIs, which include some banks, are protected by Federal Deposit Insurance Corporation (FDIC) deposit insurance. Strict capital and liquidity requirements as well as government supervision play a role in this secured status. Because, of course, for lawmakers, stablecoin coverage is critical. 


How stablecoins are regulated is debatable

There was agreement in the House of Representatives that the backing of stablecoins must be disclosed and checked. But many opposed Liang's idea that every stablecoin issuer should need the same kind of regulation as banks.


I get the impression that restricting stablecoin issuance to IDIs, which have a high barrier to entry, might limit competition. Such recommendations could have an impact on equal opportunities


, says Democratic Congressman Gregory Meeks from New York, according to The Block . Ritchie Torres, also a Democrat, suggested that stablecoins are best “not run through the blunt instrument of banking regulation.” He therefore criticized the IDI proposal. He argues that Circle, the company behind the USDC, got stuck in its application for a banking license.


Liang also plans to present her report on stablecoins before the Senate Banking Committee next week. However, observers believe that it is a lot easier to convince the House of Representatives of a new law. However, the fact that midterm elections are due in November only makes the project even more difficult. 

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