1/ There's a ton of action in Congress on stablecoin regulation right now & @RepJoshG just proposed a draft bill with the best language we've seen yet.
If Congress does anything on crypto this year, it may look like this. An update on stablecoins in DC 🧵
gottheimer.house.gov/news/documents…
If Congress does anything on crypto this year, it may look like this. An update on stablecoins in DC 🧵
gottheimer.house.gov/news/documents…
2/ Congress is working on a bunch of crypto-related policy issues now, but stablecoins are top priority.
That's largely due to the stablecoin report issued by the President's Working Group on Financial Markets (PWG) in November. Read more on that here:
That's largely due to the stablecoin report issued by the President's Working Group on Financial Markets (PWG) in November. Read more on that here:
https://twitter.com/KMSmithDC/status/1455307028709191688?s=20&t=yizhLpLDQZzlMUG2Q59a1A
3/ The PWG report said a few noteworthy things.
It said all stablecoin issuers should be insured depository institutions (read: banks), which is a very bad idea.
But it also suggested that federal agencies lack authority to regulate stablecoins & said Congress must take action.
It said all stablecoin issuers should be insured depository institutions (read: banks), which is a very bad idea.
But it also suggested that federal agencies lack authority to regulate stablecoins & said Congress must take action.
4/ So now Congress is focused on stablecoins, holding two hearings in the last two weeks.
As is becoming typical, House Financial Services was constructive & positive while Senate Banking was more hostile (with exceptions, as you'll see below).
They're also writing new bills...
As is becoming typical, House Financial Services was constructive & positive while Senate Banking was more hostile (with exceptions, as you'll see below).
They're also writing new bills...
5/ ...rather than revisiting old ones, which is a good sign, because none of those were reasonable options.
For example, you might remember the STABLE Act from late 2020, which said all stablecoin issuers had to get a bank charter. I haven't heard anyone mention it this year. 👍
For example, you might remember the STABLE Act from late 2020, which said all stablecoin issuers had to get a bank charter. I haven't heard anyone mention it this year. 👍
6/ Which brings us to @RepJoshG's draft bill published yesterday, not only the best we've seen, but really quite good. Let me explain why:
The bill creates a new regulatory classification for "qualified stablecoins" that meet certain minimum standards of safety & soundness.
The bill creates a new regulatory classification for "qualified stablecoins" that meet certain minimum standards of safety & soundness.
7/ Qualified stablecoins would be supervised by the OCC, subject to collateral restrictions, & required to have insurance.
The benefit of bearing those compliance costs: qualified stablecoins would be exempt from regulation as securities by the SEC or derivatives by the CFTC. ✅
The benefit of bearing those compliance costs: qualified stablecoins would be exempt from regulation as securities by the SEC or derivatives by the CFTC. ✅
8/ Two features of the bill deserve added praise:
- it explicitly allows nonbanks to issue stablecoins
- it uses an opt-in model, so issuers who want to take advantage of it can, but none are forced to
This strikes a great balance between mitigating risk & enabling innovation.
- it explicitly allows nonbanks to issue stablecoins
- it uses an opt-in model, so issuers who want to take advantage of it can, but none are forced to
This strikes a great balance between mitigating risk & enabling innovation.
9/ The opt-in model is important for DeFi stablecoins that use crypto-collateralized or algorithmic mechanisms, which would be unaffected.
This is exactly the right approach: addressing risks we understand now without creating a regulatory moat for some at the expense of others.
This is exactly the right approach: addressing risks we understand now without creating a regulatory moat for some at the expense of others.
10/ Rep. Gottheimer's bill is the first really good proposal we've seen, but perhaps not the last.
On the other side of Congress, @SenToomey is working on his own bill, & given how great he's been on crypto, I'm very excited to see what he comes up with.
On the other side of Congress, @SenToomey is working on his own bill, & given how great he's been on crypto, I'm very excited to see what he comes up with.
https://twitter.com/robblackwellAB/status/1493605431457062919?t=WkfyKRwms8tSip62q9yBdw&s=19
11/ While Congress keeps making progress, I assume regulators will exercise restraint & let our elected representatives do their work, rather than pushing their authority past its breaking point to try regulating stablecoins.
I hope my assumption is correct. If not, trouble. 😶
I hope my assumption is correct. If not, trouble. 😶
12/ Elsewhere in DC, there's talk of a US dollar central bank digital currency (CBDC), but not much interest beyond a small group.
The Fed issued its long-awaited CBDC report last month. The response from industry & many policymakers has been "no thanks."
The Fed issued its long-awaited CBDC report last month. The response from industry & many policymakers has been "no thanks."
https://twitter.com/jchervinsky/status/1484303249901506562?s=20&t=fSJTV41Drap1h6NdCJ1xMw
13/ To summarize, although it's hard to get Congress to agree on anything these days, we're seeing a lot of positive momentum on both sides of the aisle.
I'm more optimistic than ever about smart stablecoin regulation that works for everyone: consumers, industry, & government.
I'm more optimistic than ever about smart stablecoin regulation that works for everyone: consumers, industry, & government.
14/ If you're a US crypto company looking to have your voice heard in the legislative process, or a policymaker in DC working on stablecoin regulation, please reach out to me & @blockchainassn. We're here to help.
I'll keep you all updated as this develops. Stay tuned.
[end]
I'll keep you all updated as this develops. Stay tuned.
[end]
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