Key Takeaways
- The stablecoin regulating STABLE Act aims to create a framework for creating dollar-denominated Stablecoins in the US.
- Several Democratic Party legislators have expressed reservations, fearing President Donald Trump could use the bill to allow his family to benefit from the proposed law.
- It is now upon the full House and Senate to debate the bill and determine its future.
The United States House Financial Services Committee has voted to advance the STABLE Act, the stablecoin regulation framework bill, with 32 members in favor and 17 opposed.
According to a press release from the House, the bill, formally named the Stablecoin Transparency and Accountability for a Better Ledger Economy Act (STABLE), would create a framework for the introduction of dollar-denominated stablecoins, including reserve requirements and anti-money laundering standards.
Bill Encountered Resistance from Democrats
Committee chair French Hill introduced the STABLE Act bill, which provides rules around using stablecoins, a digital asset tied to a currency such as the US dollar. It ensures issuers give information about their business and how they back their tokens. The bill had encountered resistance from leading Democrat Maxine Waters, who later voted against the bill and criticized members of the Republican Party for the law. She stated:
“This law creates a dangerous precedent. It legitimizes attempts by entities within the system to write financial rules to their advantage.”
Several members of the Democratic Party had expressed concerns about the possibility of US President Donald Trump riding on the bill to allow his family-backed stablecoin to become a government payment system, arguing that the legislation validated the President and “his insiders’ efforts to write rules of the road that will enrich themselves at the expense of everyone else.” The Trump family-backed World Liberty Foundation recently launched a stablecoin, World Liberty Financial USD (USD1).
STABLE Act Protects Consumers
The stablecoin regulating legislation, initially the “Stablecoin Tethering and Bank Licensing Enforcement” Act, was originally introduced in 2020 but failed to pass. The bill initially aimed to regulate stablecoin issuers by requiring them to obtain banking charters and follow traditional banking regulations. However, the STABLE Act reintroduced with amendments in March differs from the 2023 Bill. According to Bryan Steil, the chairperson of the Digital Assets, Financial Technology, and Artificial Intelligence Subcommittee:
“The STABLE Act protects consumers while cementing the US Dollar as the world’s reserve currency and promoting the next generation of Web3 businesses here in the United States.”
Supporting the bill, Congressman Dan Meuser said the legislation would:
“Make payments faster, cheaper, and more accessible, reducing costs to benefit businesses and consumers alike.”
Two dominant players currently rule the global stablecoin ecosystem: Tether’s USDT, with an approximately 60% market share and a circulation of $144 billion USDT, and Circle, with its 25% market share and at least $60 billion USDC in circulation. Other players include USDS, formerly Maker’s DAI, which is the third-largest stablecoin with $8 billion in circulation and a 3.4% market share. In the meantime, Binance, a cryptocurrency exchange, has recently delisted several stablecoins, including USDT, in the European markets to comply with stringent MiCA regulations.
GENIUS Act and STABLE Act Await Full House Vote
There are other stablecoin regulation-related bills within the corridors of Congress, such as the Guiding and Establishing National Innovation for US Stablecoins or the GENIUS Act, which aims to create oversight and reserve rules for issuers. The US Senate Banking Committee has already voted for the GENIUS Act in an 18-6 vote following its updating in consultation with the Committee’s Democrats. On the updated GENIUS Act, Democratic Senator Kirsten Gillibrand said it made “significant improvements to several important provisions” in areas such as consumer protections and authorized stablecoin issuers. The two bills, the GENIUS Act and the STABLE Act, now wait for debate time on the floor of the House and Senate, respectively, before they head for a floor vote.
Conclusion
The passing of the STABLE Act is a significant step forward for the future of the digital asset industry, especially at a time when the United States is considering facilitating a financial revolution amid high stakes. With the ongoing push from legislators and the growing attention from regulators, the push toward stablecoin regulation is gaining momentum. The only remaining hurdle is the possibility of the House and Senate finding common ground to consolidate a new regulatory model that will mark the next chapter of American digital finance.
Frequently Asked Questions (FAQs)
How many types of Stablecoins exist?
Currently, at least four primary stablecoin types can be identified by their underlying collateral structure: fiat-backed, crypto-backed, commodity-backed, and algorithmic stablecoins.
What is the regulatory risk associated with stablecoins?
Currently, the risks include liquidity challenges, scalability issues, volatility, cybersecurity threats, and legal and compliance concerns.
What is the difference between a CBDC and a stablecoin?
The key distinction in the stablecoin Vs. CBDC debate lies in control: While CBDCs are state-controlled, stablecoins are market-driven. This difference creates competition in cross-border payments, financial inclusion, decentralized banking, and decentralized finance (DeFi).
