On Wednesday evening, members of the US Congress introduced a new bill that may implement comprehensive supervision of all stablecoins. If the bill is passed, any stablecoin-related services will be considered illegal without first obtaining approval from multiple government agencies:
“For any issuer, the following actions are illegal: issuing stablecoins or stablecoin-related products, providing any stablecoin-related services, participating in any stablecoin-related business activities, including those involving stablecoins issued by other issuers Related activities, these activities are ongoing, but have not obtained prior written approval from federal banking institutions, companies, and the Federal Reserve Board of Governors.”
The bill, called the “Stablecoin Act,” aims to “protect consumers from the risks posed by emerging digital payment tools, such as Facebook’s Libra and other stable currencies.” However, it is only one month before the end of the 116th Congress. It will be difficult for the bill to be approved in time.
Rohan Grey, an assistant professor at Willamette Law, explained on Twitter that although the bill mainly targets private stablecoins issued by large technology companies, its wording is aimed at “a wide range of stablecoin activities.” Grey added that the bill seeks to “prevent the systemic’shadow banking’ risks that led to the global financial crisis of 2007-2008.”
The main initiator of the bill, Democratic Congresswoman Rashida Tlaib, said that the purpose of the “Stablecoin Act” is to protect people of color and other minorities who cannot access regulated financial services.
It is vital to prevent cryptocurrency providers from repeating the criminal activities of traditional large banks against low- and middle-income residents. –Congresswoman Rashida Tlaib (RepRashida) December 2, 2020
The bill was strongly opposed by the crypto community. Meltem Demirors, chief strategy officer of CoinShares, responded to Tlaib’s tweet, stating that “cryptocurrency reduces the cost of providing services to people who have been excluded from banking services.”
She added that by introducing the bill, service costs and compliance difficulties will increase. As a result, the people Tlaib wants to protect will not be able to access financial services.
Circle CEO and co-founder Jeremy Allaire tweeted that the bill “will be a major step backwards in digital currency innovation in the United States, limiting the accelerated development of its blockchain and financial technology industries.”
Representative Tyler Lindholm of the Wyoming House of Representatives believes that the bill violates the basic concept of decentralization in the crypto industry:
“The decentralized world does not need to be centralized. In recent years, the crypto industry has been successful in bringing financial freedom to those without bank accounts, and there is no nepotism as described in the bill.”
Shapeshift CEO Erik Voorhees also believes that the bill is doomed to fail:
“Maybe we can’t force the crypto industry to operate like a bank? (In fact, it cannot and will not).
