Lawmakers in Congress are introducing the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act aimed at regulating the growing stablecoin market.
Congresswoman Rashida Tlaib, Congressman Jesús “Chuy” García and Congressman Stephen Lynch introduced the act this week.
It act would amend the Federal Deposit Insurance Act to classify and regulate stablecoins.
If passed, the act would require that any stablecoin issuers obtain a banking charter and abide by applicable banking regulations. Companies would also have to notify and receive approval from the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) and obtain insurance from the FDIC at the Fed that the firm’s issued stablecoins can be converted to US dollars on request.
According to Congresswoman Tlaib’s press release, the act seeks to protect consumers from the risks involved in utilizing digital payment options. The release references Facebook’s Libra currency explicitly.
“The Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act, would protect consumers from the risks posed by emerging digital payment instruments, such as Facebook’s Libra and other stablecoins currently offered in the market, by regulating their issuance and related commercial activities.
Digital currencies, whose value is permanently pegged to or stabilized against a conventional currency like the dollar, pose new regulatory challenges while also represent[ing] a growing source of the market, liquidity, and credit risk.”
The legislation’s authors say the pandemic has caused many low-and-moderate-income (LMI) individuals to seek out faster and more accessible digital payment methods, including stablecoins. This gap in accessibility has placed LMI individuals at risk of utilizing digital currencies that may be hastily released by bad actors.
Congressman Jesús “Chuy” García says the act is designed to help LMI constituents who lack adequate access to the financial system.
“Working class communities like mine in Chicago already face tremendous barriers to accessing financial services and credit. The Trump administration’s deregulation of our financial system has opened the door for tech companies to consolidate their power by preying on people of color with products that promise inclusion but only undermine our banking system.
That’s why I’m proud to introduce the STABLE Act with Reps. Tlaib and Lynch to ensure that new financial tools like stablecoins have proper oversight and protections. Congress must ensure that new financial technologies and payment tools do not prey on vulnerable users. The STABLE Act does just that – it embraces innovation while also protecting consumers.”
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