September 24, 2022

US Lawmaker Introduces Draft Bill on Stablecoin Management

A member of the Democratic Party and New Jersey Representative, Josh Gotteheimer introduced a draft of legislation, which focuses on stablecoin management. The purpose of the legislation is to distinguish authorized stablecoins from some of the other volatile cryptocurrencies that are part of the market. One of the main goals of this draft bill is to put in suitable protections for investors and consumers alike. Another essential reason for introducing the legislation is that it would help in promoting fintech innovation in the United States. According to critics, insufficient reserve capital is the primary reason behind bad actors, defenselessness against manipulation and failure.

Gotteheimer is one of the lawmakers who believe that the only kind of digital currencies that should be approved and regulated are stablecoins because it is possible to redeem them for US dollars on a head-to-head basis. The Office of the Comptroller of the Currency (OCC) would be responsible for supervising the stablecoin issuers and also develop the rules applicable to them. These would include anti-money laundering policies, leverage ratios, as well as other protections and surveillance. According to the OCC, it is vital to know how dollar will be transferred and then used in the 21st century.

Banks as well as other non-banking institutions could also be given the authority of issuing these stablecoins. However, this would only be permitted if the institution in question is able to satisfy specific requirements and meet certain regulations that have been developed. Stablecoins indicate that they can be utilized in the same way as people use non-digital money. Even though their primary purpose is to facilitate and simplify trading, they can also be used for hiding the assets people may have in digital markets. A lot of people believe that stablecoins could be used as a foundation for making payments and facilitating other financial services.

One of the reasons that stablecoins had been introduced was to offer people price stability, something that cryptocurrencies could not offer due to their volatility. However, stablecoins would only be able to accomplish this goal if they are backed up by the reserve asset, which is the US dollar. This way, stablecoins were developed to offer the best of both worlds i.e. instant processing and execution and security. This is primarily why they have managed to gain traction in the first place. Gotteheimer’s plan received support from several other lawmakers including Dante Disparte, Cynthia Lummis and Nellie Liang.

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