A new bill introduced to the United States Congress on Wednesday could enforce blanket regulation on all stablecoins. If passed, any service provided in relation to these types of cryptocurrencies would become illegal without first receiving approval by multiple government bodies:
“It shall be unlawful for any person to issue a stablecoin or stablecoin-related product, to provide any stablecoin-related service, or otherwise engage in any stablecoin-related commercial activity, including activity involving stablecoins issued by other persons, without obtaining written approval in advance, and on an ongoing basis, from the appropriate Federal banking agency, the Corporation, and the Board of Governors of the Federal Reserve System.”
Dubbed “The Stable Act,” the bill is intended to “protect consumers from the risks posed by emerging digital payment instruments, such as Facebook’s Libra and other Stablecoins.” However, with just a month to go until the end of the 116th Congress, the bill faces an uphill battle to be approved in time.
Assistant Professor at Willamette Law, Rohan Grey, explained on Twitter that while the bill is primarily aimed at private stable tokens issued by large tech companies, it was worded in such a way as to include a “wide range of monetary activities.” Grey added that the bill seeks “to prevent the kind of systematic ‘shadow-banking’ risks that led to the global financial crisis of 2007–2008.”
Democratic Party congresswoman Rashida Tlaib, the lead instigator of the bill, stated that the Stable Act is designed to protect people of color and other minority groups who lack access to regulated financial services.
Preventing cryptocurrency providers from repeating the crimes against low- and moderate-income residents of color traditional big banks have is critically important. That’s why I’m proud to introduce the #STABLEAct with @RepChuyGarcia and @RepStephenLynch. https://t.co/yorQPo6wz4
— Congresswoman Rashida Tlaib (@RepRashida) December 2, 2020
The bill has been met with strong disapproval from the crypto community. CoinShares chief strategy officer Meltem Demirors responded to Tlaib’s tweets, stating that “cryptocurrencies lower the cost of servicing the populations that have historically been excluded from the banking sector.”
She added that by introducing the act, costs and compliance would increase, subsequently cutting off access to the very people groups Tlaib hopes to protect.
In an eight-post thread on Twitter, Circle CEO and co-founder Jeremy Allaire claimed that the act “would represent a huge step backward for digital currency innovation in the United States, limiting the accelerating progress of both the blockchain and fintech industry.”
Wyoming House Representative Tyler Lindholm believes that the act goes against the crypto sector’s fundamental ethos of decentralization:
“Centralization of power for a decentralized world. No thanks. This industry has been light years more successful in bringing financial freedom to the unbanked and that happened without cronyism as suggested in this bill.”
Shapeshift CEO Erik Voorhees shared his opinion that the bill is doomed to fail:
“Let’s not force crypto to act like the banks maybe? (And indeed, it can’t, and won’t).”