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Proposed Stablecoin Bill Would Give States Right To Regulate Crypto

 |  April 26, 2023

Cryptocurrency’s go-ahead landscape is reaching a critical regulatory inflection point.

And it may be stablecoins, the backbone of the cryptocurrency economy, that help chart a clear path forward.

This, as Republican lawmakers on the House Financial Services Committee unveiled their version of a new draft stablecoin bill Monday (April 24), following a contentious debate April 19 over an older proposal.

The GOP document makes several changes, including giving state regulators more power to charter stablecoin issuers, something which New York Department of Financial Services (NYDFS) Superintendent Adrianne A. Harris had been pushing for, as well as more generally narrows the bill’s focus, including excluding algorithmic stablecoins.

Read more: G20 Nations Consider Collaboration To Regulate Crypto

Under the original bill, stablecoin issuers, which include both banks and nonbanks, needed to register with the Federal Reserve even if they had received state approval. The latest iteration still allows for the Fed to take ultimate enforcement action against issuers if individual states fail to do so upon its recommendation.

Importantly, the Republicans’ bill includes a proposed confirmation that stablecoins are not securities and therefore should not be regulated by the Securities and Exchange Commission (SEC).

GOP lawmakers have previously sparred with SEC Chairman Gary Gensler over his enforcement-as-policy approach to the crypto sector and frequent claims that the majority of tokens are securities.

The SEC earlier this year sent a Wells notice to stablecoin issuer Paxos, alleging that its Binance-branded BUSD stablecoin was an unregistered security.

“The SEC has forced digital asset market participants into regulatory frameworks that are neither compatible with the underlying technology nor applicable,” a group of Republican lawmakers wrote to Gensler.

“It’s the law; it’s not a choice,” Gensler has repeatedly said about the need for crypto firms to register with his agency.

The GOP’s new stablecoin bill is scheduled to be debated Thursday (April 27) as part of a congressional hearing held by the Subcommittee on Digital Assets, Financial Technology and Inclusion titled, “The Future of Digital Assets: Identifying the Regulatory Gaps in Digital Asset Market Structure.”