United States Senator Bill Hagerty has unveiled a discussion draft of a bill to provide clear regulations on the use and operations of stablecoins. This proposed legislation mirrors the same content and objectives as the “Clarity for Payment Stablecoins Act of 2023.”, however with a few modifications.
Hagerty’s Bill Proposes Dual Regulatory Oversight For Stablecoin Issuers
In July 2023, Republican Senator Patrick McHenry introduced the “Clarity for Payment Stablecoins Act of 2023” targeted at providing the needed recognition, supervision, and regulation of stablecoins in the United States. The bill was cleared by the US House Financial Service Committee seven days after introduction and has since been put on the Union Calendar to be introduced for a debate and vote in the US House of Representatives.
To maintain the vision of establishing stablecoin regulations in the US, fellow republican Senator Hagerty has released a discussion draft on the “Clarity of Payment Stablecoins Act of 2024”, which comes as Senator McHenry aims to retire at the end of this current administration
This is because all pending legislation that is not passed at the end of an administrative term is cleared out and has to be reintroduced again in the new Congress to gain approval. The discussion draft by Senator Hagerty builds on Senator McHenry’s bill introducing two key additions.
Firstly, the draft proposes that only stablecoin issuers of tokens with more than $10 billion in market capitalization are supervised by federal regulators, with operators of stablecoins below the specified threshold monitored by state authorities. Furthermore, Senator Hagerty advises the Federal Reserve serves as a regulator for depository institutions, while the Office of the Comptroller of the Currency supervises the operation of federally licensed non-bank issuers.
Commenting on this proposed legislation, the Republican lauds the positive potential of stablecoins in the US. Senator Hagerty says:
For too long, these benefits and the broader promise of stablecoins have been hindered by the lack of clear regulations. My draft legislation provides much-needed clarity, putting in place the legal framework necessary to unlock this technology’s full potential for the benefit of Americans
For context, a draft discussion represents an early version of a proposed legislation that is circulated to obtain feedback, from industry stakeholders, lawmakers, and experts. It differs from a bill that has been officially introduced to Congress.
Is There A Need For Caution Over Stablecoins Clarity Bill?
The “Clarity for Payment Stablecoins Act” is part of the first set of proposed legislation aimed at bringing administrative recognition to stablecoins and cryptocurrency in general. While this is a welcome development, certain members of the crypto community express concern over the contents of this bill and its implications.
In an X post on Friday, Ethereum community member Ryan Berckmans highlighted some of these concerns. Firstly, the bill by Senator Hagerty bars the use of non-licensed stablecoins likely to include decentralized tokens e.g. DAI.
Furthermore, foreign companies such as Tether would be mandated to obtain a license to issue stablecoins to US citizens. In addition, licensed stablecoins reserves are limited to US dollars, demand deposits, or short-term treasuries eliminating options such as gold. Berckmans believes these rules and others will result in significant market fragmentation as well as stifle innovation in the stablecoin industry.
At the time of writing, stablecoins have a combined valued of $165.66 billion, representing 7.59% of the crypto market. Tether (USDT) remains the dominant stablecoin with a market cap of $119.69 billion.