US Lawmakers’ Draft Stablecoin Bill to Not Let Silicon Valley Own the ‘Future of Digital Payments’

Congresswoman Rashida Tlaib has introduced the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act, which apparently “embraces innovation while protecting consumers.”

According to the official document, the use of stablecoins and other cryptocurrencies presents “unique challenges” while raising the same core fair lending risks present in the traditional market. It states,

“Although cryptocurrencies may offer new benefits, this type of cryptocurrency should not be beyond the reach of fair lending laws and regulation.”

“it is critical not to let Wall St and Silicon Valley own the future of digital payments.”

It alleges that Facebook is taking advantage of the financial exclusion by pursuing the issuing of stablecoins, and JPMorgan and Apple have also considered the same.

As such, under the Act, any issuer of a stablecoin will be required to obtain a banking charter, for which the prospective company or bank will have to notify and obtain approval from the Fed, the FDIC, and the appropriate banking agency six months before its issuance.

The issuer company has to follow the banking regulations and obtain FDIC insurance or maintain reserves at the Fed to ensure the stablecoin is readily converted into USD.

Because stablecoins pose new governance challenges and represent a growing source of the market, liquidity, and credit risk, the STABLE Act is proposed to protect consumers by regulating their issuance and related commercial activities.

Stablecoins, by their nature, can only INCREASE access to financial services. Unlike the existing system, they do not require the use of a bank account

The existence of stablecoins does not prevent consumers from using any other traditional payment, savings or credit offerings

— Reuben Bramanathan (@bramanathan) December 3, 2020

Reuben Bramanathan, a blockchain consultant and former Coinbase lawyer, labeled this as “overly broad and poorly targeted.”

This will only “concentrate more power in banks, reduce competition, and ultimately reduce financial inclusion.”

Jeremy Allaire, the co-founder and CEO of Circle, the company behind the stablecoin USDC, also called this a,

“huge step backwards for digital currency innovation in the United States, limiting the accelerating progress of both the blockchain and fintech industry.”

Recently, Circle partnered with the Venezuelan government to provide aid to the front-line medical workers battling with coronavirus.

While Bitcoin evangelist Andreas Antonopoulos argued that it would make “decentralized alternatives even more attractive,” that might not necessarily be the case.

Jake Chervinsky, general Counsel at Compound Finance, says the draft bill is “extremely” broad and would apply to “any person” engaged in issuing and commercial activity related to any stablecoin.