Circle CEO Jeremy Allaire noted that the new stablecoin bill could prove pivotal for the future of the U.S. dollar, according to an April 15 tweet.
The U.S. House Financial Services Committee published a draft of its Stablecoin bill on April 15. The Bill makes sweeping recommendations like proposing a moratorium on algorithmic stablecoins and making the Federal Reserve the regulator for stablecoins by nonbank entities.
Besides that, the Bill also discusses central bank digital currencies (CBDC) and recommends further research on digital dollars.
Key Provisions of the Draft Stablecoin Bill
The Bill allows nonbank entities to register and clearly states the factors that regulatory bodies must consider to grant these firms an operating license. According to the Bill, firms that fail to register with the authorities could be liable to a $1 million fine or a five years imprisonment.
It also focuses on fraud prevention and tackles stablecoins depeg. The Bill explicitly prohibits rehypothecation and commingling of funds. It also makes strict provisions for stablecoin issuers’ disclosure and attestation, while they must establish a straightforward redemption process.
Additionally, the Bill proposed a 2-year moratorium on creating, originating, and issuing endogenously collateralized stablecoins that are not already in existence. It directs regulators to research this type of stablecoins and publish a report within a year of the enactment of the Act.
These provisions are unsurprising, considering the Bill was drafted against Terra UST’s algorithmic stablecoin collapse in 2022.
Meanwhile, a public hearing on the topic is scheduled for April 19 — a day after the SEC Chair, Gary Gensler, appears before the committee. Several stakeholders, like Circle Chief Strategy Officer Dante Disparte, would testify at the hearing.
Circle CEO Shares Views on the Bill
Circle CEO Jeremy Allaire said the draft bill is coming at a crucial time for the U.S. Dollar. Allaire noted that the currency competition is heating up, adding that the U.S. needed to step up with precise regulation. He said:
“There is clearly the need for deep, bi-partisan support for laws that ensure that digital dollars on the internet are safely issued, backed and operated.”
Meanwhile, Allaire pointed out that the BIll had several open and challenging issues that needed to be addressed by stakeholders.
The U.S. Dollar dominance has come under increased threat following recent events in the global world. Coinbase former CTO Balaji Srinivasan expressed those concerns when he said the Dollar was no longer too big to fail.
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