House bill

Stablecoins will face US bank-like regulation under internal bill – source

The United States Capitol building is pictured in Washington, U.S. March 15, 2022. REUTERS/Emily Elconin

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WASHINGTON, July 20 (Reuters) – Issuers of so-called “stablecoins”, virtual currencies whose value is pegged to traditional currencies, would face bank-like regulation and oversight under a proposed law from senior lawmakers in the U.S. House of Representatives, according to a source familiar with the matter.

Leading Democrats and Republicans on the House Financial Services Committee have nearly completed a bill that would subject stablecoin issuers to prudential capital, liquidity and oversight standards similar to those banks already face.

The bill would allow non-banks to issue stablecoins provided they adhere to the stricter oversight, but would prohibit companies from issuing their own stablecoins, according to the source.

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Issuers of stablecoins tie their value to traditional currencies like the US dollar, wanting digital currencies to have low volatility.

But the high-profile collapse and strains experienced by some major stablecoin issuers in recent months has led to heightened scrutiny from regulators, who fear consumers may be harmed. The bill would also require issuers to hold reliable and sufficient reserves, the source said. Read more

The measure faces an uncertain future in Congress. Support from senior officials in both parties suggests it could pass the House, but the Senate has not been as involved in the negotiations, the source said. There are only a few months left before the US midterm elections in November, when policymaking is expected to come to a halt.

Spokespersons for Rep. Maxine Waters, the Democrat who chairs the committee, and Rep. Patrick McHenry, her ranking Republican, did not respond to requests for comment.

The U.S. Treasury has been calling on Congress to draft legislation establishing new rules for stablecoins since it released a report in November that urged Congress to allow bank-like oversight of the new financial product. Read more

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Reporting by Pete Schroeder; Editing by Cynthia Osterman

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