The introduction of bipartisan legislation to create a stablecoin regulatory framework in the U.S. has been postponed until after the August recess.
A regulatory framework that protects consumers while allowing for responsible innovation
In a statement, Rep. Maxine Waters (D-CA) said,
“Although the Ranking Member, Secretary Yellen, and I have made considerable progress towards an agreement on the legislation, we are unfortunately not there yet, and will therefore continue our negotiations over the August recess.”
She added that, “It’s critical that we continue moving the ball forward on this so we can have a regulatory framework that protects consumers while allowing for responsible innovation.“
According to original expectations, the bill was going to be advanced yesterday as a result of the water and Rep. Patrick McHenry’s bipartisan cooperation (R-NC). According to reports, the legislation would require stablecoin issuers like Tether and Circle to have 1:1 reserves of their currency in circulation and would restrict the kinds of assets that might be used to back these coins.
The postponement came as a result of allegations that Treasury Secretary Janet Yellen expressed dissatisfaction with how the bill’s suggested solution to the custody of digital assets was handled.
In a February 2022 hearing, Rep. Waters highlighted the risks of stablecoins, noting that, “investigations have shown that many of these so-called stablecoins are not, in fact, backed fully by reserve assets,” and that speculative trading and a lack of investor protections “could even threaten U.S. financial stability.”
Following the failure of algorithmic stablecoin UST earlier this year, the proposed regulation of stablecoins has gained renewed urgency.
At the time, Yellen issued an “urgent” call for stablecoins to be regulated this year. She argued that the run on UST “illustrates that this is a rapidly growing product and there are rapidly growing risks,” adding that, “digital assets may present risks to the financial system and increased and coordinated regulatory attention is necessary.”
However, days later, Yellen conceded that stablecoins have yet to reach a scale “where they’re financial stability concerns” in remarks to Congress, noting that the crypto market doesn’t yet pose a “systemic risk.”
Nellie Liang, Under Secretary of Domestic Finance at the U.S. Department of Treasury, spoke at the full Committee’s hearing on “Digital Assets and the Future of Finance: The President’s Working Group on Financial Markets’ Report on Stablecoins” on February 8, 2022. She discussed the rapid development of stablecoins and the findings from the “Report on Stablecoins” by the President’s Working Group on Financial Markets (PWG).
