The Blockchain Association outlined fundamental principles for effective stablecoin legislation in a letter submitted to the U.S. House Committee on Financial Services last week.
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Association officials contend that regulatory clarity is critical to ensure that the United States remains the world leader in the development of blockchain technology. But is also necessary to protect investors and consumers from the risk. Further, the association believes that elected representatives, and not regulators, should develop these regulations.
The association outlined five principles that should be in any bill.
One, they said stablecoin legislation should focus on applying tailored regulatory standards to “custodial” stablecoins, meaning those issued, maintained, and redeemed by a firm responsible for holding assets backing the stablecoins in a bank or other financial institution.
Two, they contend that both insured depository institutions and non-bank firms should be allowed to issue stablecoins, subject to regulatory compliance obligations tailored for each category of issuer. Requiring all stablecoin issuers to obtain bank charters would restrict innovation.
Three, they believe that assets held by stablecoin issuers as backing for stablecoins should be limited to specified, high-quality, liquid assets that meet a minimum standard of safety and soundness.
Four, they suggest that stablecoin issuers should be subject to operational requirements, such as making public disclosures regarding assets held as backing for stablecoins, segregating those assets from corporate funds, implementing policies and procedures on the issuance and redemption of stablecoins, and conducting routine audits by public accounting firms.
Five, association officials said stablecoins should be overseen by a prudential regulator such as the Federal Reserve System or the Office of the Comptroller of the Currency and should be exempt from overlapping regulation by the Securities and Exchange Commission or the Commodity Futures Trading Commission.
