New law regarding stablecoin is under discussion. This time the law is not based on any rules or regulations, which are temporary. But the uniqueness of this law is that it will be promulgated as an Act. It is said that the proposed law will fundamentally change the ecosystem surrounding the stablecoin. What is frightening in the law is that the ever increasing stablecoin sector will most likely lose its momentum.
The intent of lawmakers was that they wanted to eliminate abuse and ambiguities in the stablecoin sector. However, it seems that the intent was right but indirectly the growth of stablecoin had been put into jeopardy.
Once the sector came to know of the proposed Stablecoin Act, there was huge hue and cry within the sector. Protests were witnessed immediately from crypto and blockchain groups who did not find the law in their favour. They also protested that since the law directly affects them, then they should have been taken on board. They complained that neither of them were consulted nor taken on board to make the law beneficial for both ends.
A few provisions taken in the proposed law are of paramount importance. Many provisions had been incorporated in the proposed law which have mandated upon issuers of stablecoin to comply with certain requirements.
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The first and foremost provision related to obtaining of license before anyone decides to issue the stablecoin. The license had been made mandatory which needed to be obtained from federal banking charter by the stablecoinissuer. Another provision provided in the law, required the issuer to comply with the compliance requirements. But the issuer would need to ensure in letter and spirit. Anything above or below will be dealt with strict action.
Apart from federal chartered bank’s approval, the issuer would also be required to seek permission from Federal Deposit Insurance Corporation (FDIC). In addition, this permission would need to be obtained six months prior to issuing of stablecoins by the issuer.
Earlier, the stablecoin issuers had the liberty to work along those banks which had FDIC coverage in place already. But the new law had required the issuer to obtain this coverage for itself directly from FDIC on its own. In case stablecoin issuer cannot do so then it can deposit proportionate amount of coverage with Federal Reserve to ensure compliance.