WASHINGTON, D.C. — U.S. Congressman Josh Gotthiemer (NJ-5) Tuesday released a discussion draft of the Stablecoin Innovation and Protection Act of 2022, legislation focused on defining qualified stablecoins, carving qualified stablecoins out from more volatile cryptocurrencies, and putting appropriate protections in place for consumers and investors.
The law will help lower the risk of instability in the financial market, protect consumers, and support ongoing fintech innovation in the U.S.
The legislation defines qualified stablecoins as a cryptocurrency redeemable on demand on a one-to-one basis for U.S. dollars and issued by one of two qualified issuers, either an insured depository institution such as a bank or a non-bank qualified stablecoin issuer. The bill will help protect against systemic risk, fraud, and illicit financing.
The legislation provides the Office of the Comptroller of the Currency (OCC) with primary oversight authority over both types of stablecoin issuers. To help further protect consumers, the Federal Deposit Insurance Corporation (FDIC) will be required to develop a Qualified Stablecoin Insurance Fund to manage the insurance of redemption payments of non-bank issuers.
“The expansion of cryptocurrency offers tremendous potential value for our economy. But for cryptocurrency to grow and thrive here in the United States, instead of overseas, we must provide more direction and certainty to the marketplace to help boost innovation and protect consumers,” said Gottheimer (NJ-5), a member of the House Financial Services Committee. “That’s why I’m releasing the Stablecoin Innovation and Protection Act to encourage cryptocurrency innovation in the United States, define qualified stablecoins, and protect Americans against bad actors like predatory entities and terrorists. We shouldn’t stifle innovation in the cryptocurrency market. We should ensure the proper safeguards are in place, and ensure our nation is a leading force in financial technology.”
The Stablecoin Innovation and Protection Act of 2022 includes the following provisions:
Require all qualified stablecoins to be issued by either a bank or a non-bank qualified stablecoin issuer.
- The non-bank issuer must maintain at least 100% reserve assets consisting of U.S. dollars, U.S. government-issued securities such as U.S. Treasuries, and other assets as deemed appropriate by the Office of the Comptroller of the Currency (OCC).
- The cash collateral must be held in a segregated Federal Deposit Insurance Corporation (FDIC)-insured account.
Define qualified stablecoins as a cryptocurrency redeemable on demand on a one-to-one basis for U.S. dollars and issued by one of the two qualified issuers.
- A qualified stablecoin is defined as not a security or a derivative.
Provide the OCC with primary oversight authority over both types of stablecoin issuers and, in coordination with any other necessary agencies, be required to issue rulemakings for issues such as leverage ratios, auditing requirements, anti-money laundering/know-your-customer compliance, redemption requirements, liability management standards, and interoperability.
- The FDIC will be required to develop a Qualified Stablecoin Insurance Fund to manage the insurance of redemption payments of non-bank issuers.
Does not restrict the issuance of other types of cryptocurrencies. The Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) are also not restricted from examining non-qualified stablecoins and other cryptocurrencies as potentially being securities and derivatives.
Discussion draft text of the Stablecoin Innovation and Protection Act can be found here.
“Rep. Gottheimer’s bill represents the most comprehensive and well-thought-out stablecoin legislation we’ve seen to date,” said Kristin Smith, Executive Director of the Blockchain Association. “We are pleased that Congress is taking a proactive approach by engaging with stakeholders in industry and government as they consider the best path for stablecoin regulation. We thank Rep. Gottheimer for his leadership in this area and look forward to continuing to work with him on these issues going forward.”
“We welcome the leadership from Representative Gottheimer, who has taken a thoughtful, risk-based approach to stablecoin innovations in the U.S. and how they can fit inside Federal regulatory frameworks. Supporting bank and non-bank innovations in the payment system is key to long-range competitiveness and broad optionality for how dollars move in the 21st century,” said Dante Disparte, Circle’s Chief Strategy Officer and Head of Global Policy.
“The Digital Chamber of Commerce appreciates Rep. Gottheimer’s proactive consultation with the industry and looks forward to continued engagement with Mr. Gottheimer, as well as with other Members, on working towards an appropriate regulatory framework that puts in place proper safeguards, preserves innovation, and enables a level playing field for both established stablecoin arrangements and new entrants within this evolving marketplace,” said Teana Baker Taylor, Chief Policy Officer at the Digital Chamber of Commerce.