In a recent tweet on April 15th, Jeremy Allaire, the CEO of Circle, stated that the proposed Stablecoin bill could have a significant impact on the future of the US dollar. The bill was released by the US House Financial Services Committee on the same day and contains several key provisions aimed at regulating stablecoins and preventing fraud.
One of the most notable provisions is a proposed moratorium on algorithmic stablecoins, as well as the recommendation that the Federal Reserve becomes the regulator for stablecoins issued by nonbank entities. The bill also addresses central bank digital currencies (CBDC) and suggests further research on digital dollars.
The bill permits nonbank entities to register, outlining specific factors that regulators must consider before granting operating licenses. Failure to register may result in a $1 million fine or up to five years of imprisonment. The bill also emphasizes fraud prevention and addresses stablecoin depegging, prohibiting rehypothecation and commingling of funds.
In addition, stablecoin issuers must provide clear disclosure and attestation and establish a straightforward redemption process. The bill also proposes a 2-year moratorium on creating, originating, and issuing endogenously collateralized stablecoins that do not already exist. Regulators are required to research these types of stablecoins and publish a report within a year of the bill’s enactment.
These provisions were introduced in response to the collapse of Terra UST’s algorithmic stablecoin in 2022. A public hearing on the topic is scheduled for April 19th, with Circle Chief Strategy Officer Dante Disparte among the stakeholders testifying.
Allaire stated that the bill is timely for the US dollar, as competition among currencies is intensifying. He emphasized the need for precise regulation and bipartisan support for laws that ensure digital dollars on the internet are safely issued, backed, and operated. However, Allaire acknowledged that the bill has several open and challenging issues that need to be addressed by stakeholders.
The recent global events have raised concerns about the US dollar’s dominance, with former Coinbase CTO Balaji Srinivasan stating that the Dollar is no longer “too big to fail.”
