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On July 27, 2023, a stablecoin-focused bill known as the Clarity for Payment Stablecoins Act of 2023 made its way through the U.S. House Financial Services Committee for the first time. This proposed legislation intends to create a federal regulatory structure for stablecoins, with a central role played by the U.S. Federal Reserve. The Federal Reserve would have the authority to dictate stablecoin issuance regulations, but it wouldn’t limit the powers of state regulators.
This article, written by guest authors Wyatt Noble and Michael Handelsman for Kelman.Law, provides an overview of the bill.
The bill recognizes stablecoins as digital assets redeemable at a constant value, a concept familiar to those in the blockchain and cryptocurrency sectors. The debate surrounding the bill mostly arises from the criteria to become an authorized issuer. Only authorized issuers would have the right to issue payment stablecoins in the U.S.
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Authorized Issuers
Authorized issuers must be one of the following: a subsidiary of an insured depository institution approved to issue stablecoins, a federally qualified nonbank payment stablecoin issuer, or a state-qualified payment stablecoin issuer. This third category allows for state legislators to design their approach towards stablecoins.
Some Democrats, such as Representative Maxine Waters, have expressed their opposition to the bill, citing that it could enable issuers to choose more lenient state regulations. Concerns also arise over the possibility of commercial companies effectively creating their own money.
Additionally, the bill mandates that issuers hold reserves matching their stablecoins in specified assets, excluding cryptocurrencies due to their volatile nature and associated industry bankruptcies. A two-year halt would be placed on stablecoins dependent on the value of other digital assets from the same originator to sustain a fixed value.
The legislation also sets rules for the reusing of reserves, custody of stablecoins or private keys, and the regulatory oversight of non-state qualified issuers.
Stablecoins Are Not Classified as Securities
A significant portion of the bill states that stablecoins are not considered securities or commodities under specific acts from 1933 to 1970. This classification would keep stablecoin issuers out of the Securities Exchange Commission’s purview, provided they comply with the bill’s provisions.
What to Do During this Transitional Period?
Given the current regulatory ambiguity and the SEC’s growing enforcement activities, it’s essential to seek advice from legal specialists in digital assets. Consulting with the attorneys at Kelman PLLC at an early stage is the best way to adhere to potentially relevant laws and regulations, avoiding legal challenges and costs that could hinder your operations.
For a free 30-minute consultation, you can fill out the contact form here.
Do you have any thoughts or opinions on the House Financial Services Committee’s Stablecoins Act? Feel free to share your insights in the comments section below.
Frequently Asked Questions (FAQs) about fokus keyword: Stablecoins Act
What is the Clarity for Payment Stablecoins Act of 2023?
The Clarity for Payment Stablecoins Act of 2023 is a bill that aims to establish a federal regulatory framework for stablecoins, granting the U.S. Federal Reserve the authority to write requirements for issuing these digital assets. The bill also sets criteria for authorized issuers and mandates that stablecoins are not considered securities or commodities under certain existing laws.
Who can be permitted issuers of stablecoins under this bill?
Permitted issuers under this bill must fall into one of three categories: a subsidiary of an insured depository institution approved to issue stablecoins, a federally qualified nonbank payment stablecoin issuer, or a state-qualified payment stablecoin issuer.
Why are cryptocurrencies not included in the list of assets for reserves?
Cryptocurrencies are notably absent from the list of assets that can be used as reserves for payment stablecoins because of their volatile nature, along with recent bankruptcies in the industry fueled by price volatility.
What does the bill clarify about stablecoins being securities or commodities?
The bill includes a section that clarifies that stablecoins are not classified as securities or commodities as defined under various acts, including the Investment Advisers Act of 1940, the Securities Act of 1933, and the Securities Act of 1934.
How can businesses ensure compliance with the new regulations?
To ensure compliance with potentially applicable laws and regulations under this new bill, businesses are advised to consult with legal experts in digital assets, such as the attorneys at Kelman PLLC, to avoid legal challenges and unnecessary costs.
What are the concerns of some politicians like Representative Maxine Waters?
Some Democratic politicians, including Representative Maxine Waters, have expressed concerns that the bill could allow issuers to opt for more lenient state regulations and that the definitions concerning issuers could enable commercial companies to effectively create their own money.
More about fokus keyword: Stablecoins Act
- U.S. House Financial Services Committee
- Federal Reserve
- The Clarity for Payment Stablecoins Act of 2023
- Kelman PLLC’s official website
- Securities and Exchange Commission
5 comments
Never trusted stablecoins, always felt like something was off. Now with these new regulations, maybe things will be more transparent? who knows…
Wow, this stablecoin stuff is complex, didn’t know there was so much going on in regulation! Wonder how it’ll impact the little guys like us?
finally some clarity around stablecoins! I’m eager to see how this plays out, specially with the concerns from politicians. Time will tell I guess.
What does this mean for my bitcoin? i’m not into legal things but want to know if this affects other cryptos as well. Anyone can explain?? thx.
the part about cryptocurrencies not being in the reserves makes sense… i mean, they’re so volatile. But what about the small crypto companies? seems unfair!