The recent announcement of an act that seeks to regulate stablecoins within the US is currently being discussed in the Cryptoverse.
The main one is that the act proves once again that decentralized options need to be further developed, as anything remotely centralized will be suppressed by heavy regulation. Eric Conner, a product researcher at blockchain startup Gnosis, argued, “This is why it’s imperative to focus on *truly* decentralized and permissionless finance down the entire stack,” “Any centralized points of failure will be stifled by regulation written by those who do not understand what we are building.”
Bitcoin educator Andreas M. Antonopoulos has argued that the act will not be implemented, however what is interesting about it is that “it can only apply, by definition, to centralized fiat-backed stablecoins, therefore making decentralized alternatives even more attractive.”
The so-called ‘Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act,’ aka the ‘Stablecoin Classification and Regulation Act of 2020,’ was introduced this week by US Congresswoman Rashida Tlaib with Congressman Jesús “Chuy” García and Chairman of the Task Force on Financial Technology Rep. Stephen Lynch.
The announcement claimed that this act would “protect consumers from the risks posed by emerging digital payment instruments, such as Facebook’s Libra and other stablecoins currently offered in the market, by regulating their issuance and related commercial activities,” which they consider especially important during the COVID-19 pandemic.
However, considerably they will have to acquire a banking charter for any present and prospective stablecoin issuers wishing to do business in the US; obtain authorization from the Federal Reserve, Federal Deposit Insurance Corporation (FDIC) and relevant Federal banking agency; provide an ongoing analysis of any possible systemic risk; and obtain FDIC insurance or otherwise sustain reserves at the Federal Reserve to ensure that all stablecoins can be readily converted into United States dollars, on demand.
But many, such as Meltem Demirors, CoinShares’ Chief Strategy Officer, argued that the act would have the opposite effect of what the trio stated they want to accomplish.