Stablecoins have been a topic of concern for regulators across the globe. Sources reveal that the digital assets subcommittee under the United States House Financial Services Committee is preparing for a hearing on the stablecoins.
The Digital Assets and Fintech subcommittee is a new subcommittee added after House Republicans took over the Financial Services Committee. The Republican lawmaker French Hill chairs over the subcommittee.
According to an announcement, the subcommittee is going to have the hearing which is scheduled to begin at 10 AM EST on Wednesday, April 19, 2023. The topic of the meeting will be “Understanding the role of stablecoins in payments and the need for legislation.”
However, there are no specifics yet on who is anticipated to testify or any draft legislation, but this information should be accessible in the coming days. The stablecoins have been an essential part of the crypto legislation-related discussions that have been taking place in the US.
Notably, stablecoins are digital tokens that are often linked to actual assets like the US Dollar or gold, but they may alternatively be supported by a blockchain-based algorithm. An example of an algorithmic stablecoin is TerraUSD, which crashed in May and played an important role in the crypto winter of last year.
Additionally, there has been immense uncertainty in the topic of stablecoin regulation as the two prime regulators in the country have been in strife. The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have expressed contrasting opinions if stablecoins constitute securities or commodities. The SEC has refuted CFTC’s opinions claiming all crypto assets are securities except Bitcoin.
In recent times, the SEC has also been cracking down on crypto companies for violating federal laws. It also sent a Wells Notice to Paxos targeting BUSD, the third largest stablecoin. The regulator accused the firm of selling unregistered security, to which the firm’s executives categorically disagreed, claiming that BUSD is not a stablecoin under US federal laws.
Hester Peirce, Commissioner of the Securities and Exchange Commission (SEC) has urged the regulator to turn to Congress in its stablecoin drive. In a tweet, Pierce pointed out that Congress was “actively considering the issue” adding that the SEC and other financial regulators could hold public roundtables pending results from the legislators. She also said that the regulators can’t draft rules using enforcement actions.
As Congress mulls the future of cryptocurrency, the CEO of Blockchain Association sent out a message to the lawmakers, to begin with, stablecoin legislation. The organization head stressed the importance of innovation and highlighted that stablecoin and the market should be a priority in the upcoming legislation. She also rooted for having a more inclusive process, where the entire marketplace is considered “comprehensively.”
Interestingly, French Hill, who is the chair of the subcommittee, is said to be an advocate for comprehensive regulation and has not shown an antagonistic stance. It will be interesting to see the outcomes of the subcommittee’s hearing as he presides over it.
In the larger picture, stablecoin regulation has been a concern for countries and agencies across the globe. A few days back, Agustin Carstens, general manager at the Bank for International Settlements (BIS), said that the events of 2022 have cast “serious doubts on the ability of stablecoins to act as money.”
Notably, in a bid to safeguard investors, the Canadian Securities Administrators (CSA) published a set of new requirements for crypto companies with a primary focus on stablecoin trading platforms. The regulator will only approve a stablecoin if its reserves are made of “highly liquid assets” such as cash and cash equivalents and if those reserves are held with a qualified custodian.