US Congressman proposes stablecoin bill to seek to control the entire stablecoin industry

A new bill introduced to Congress seeks to rein in the entire stablecoin industry by requiring that all stablecoin-related activities must first be approved by the federal government.

Late Wednesday, U.S. lawmakers introduced a new bill that could impose comprehensive regulation on all stablecoins. If the bill passes, any stablecoin-related services would be considered illegal without first obtaining approval from multiple government agencies:

“It shall be unlawful for any issuer to issue a stablecoin or stablecoin-related product, to provide any stablecoin-related service, or to engage in any stablecoin-related business activity, including activities involving stablecoins issued by other issuers, without first obtaining written approval from the federal banking agencies, the Corporation, and the Board of Governors of the Federal Reserve System.”

The bill, known as the Stablecoin Act, seeks to “protect consumers from the risks posed by emerging digital payment instruments, such as Facebook’s Libra and other stablecoins.” However, with only a month left until the end of the 116th Congress, the bill will face many difficulties in getting approved in time.

Rohan Grey, assistant professor at Willamette Law, explained on Twitter that while the bill is primarily aimed at private stablecoins issued by large technology companies, its language is intended to target a “broad range of stablecoin activity.” Grey added that the bill seeks to “prevent the systemic ‘shadow banking’ risks that led to the 2007-2008 global financial crisis.”

The bill's lead sponsor, Democratic Congresswoman Rashida Tlaib, said the Stablecoin Act is intended to protect people of color and other minorities who lack access to regulated financial services.

It is critical to prevent cryptocurrency providers from repeating the criminal activities of traditional large banks that target low- and middle-income residents.

— Congresswoman Rashida Tlaib (@RepRashida) December 2, 2020

The bill has been met with strong opposition from the crypto community. CoinShares Chief Strategy Officer Meltem Demirors responded to Tlaib’s tweet, saying that “cryptocurrencies lower the cost of serving populations that have historically been excluded from banking services.”

She added that by introducing the bill, the cost of services and compliance would increase, with the result that the very people Tlaib wants to protect would not have access to financial services.

Circle CEO and co-founder Jeremy Allaire tweeted that the bill “would be a major step back for digital currency innovation in the U.S., limiting the accelerated development of its blockchain and fintech industries.”

Wyoming House Representative Tyler Lindholm believes that the bill goes against the fundamental idea of ​​decentralization in the crypto industry:

“A decentralized world does not need centralization. The crypto industry has been successful in recent years in bringing financial freedom to the unbanked, without the cronyism described in this bill.”

Shapeshift CEO Erik Voorhees also believes the bill is doomed to fail:

“Maybe we can’t force the crypto industry to operate like banks? (In fact, it can’t and won’t).”

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