Congress Takes a Whack at Stablecoins: Will They Survive the Regulatory Gauntlet?

by

In a move that can only be described as “let’s see what happens when we poke the digital bear,” the US House Financial Services Committee, led by the illustrious French Hill (who, despite his name, is not a French pastry) and the equally notable Bryan Steil, has decided to draft a little something they’re calling the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act of 2025. Yes, you heard that right. They’re trying to make stablecoins stable. How quaint! 😏

This proposed legislation aims to create a regulatory framework for stablecoins, which, if you’re not familiar, are like the well-behaved children of the cryptocurrency family—at least, that’s the theory. The reality, however, is a bit more like a family reunion where everyone is trying to avoid talking about Uncle Larry’s questionable investments in llama futures.

Legislation Proposes Oversight on Stablecoins

One of the bill’s key provisions is a two-year timeout for endogenously collateralized stablecoins. These are the digital assets that are backed solely by other digital assets from the same entity—like a dog chasing its own tail, but with more paperwork. Lawmakers, in their infinite wisdom, argue that these stablecoins are about as stable as a tightrope walker on a unicycle during an earthquake. 😬

To further investigate this digital circus, the bill mandates that the US Treasury Department, in cahoots with the Federal Reserve, SEC, and OCC, conduct a comprehensive study. This study will evaluate everything from the technological design to the reserve compositions of stablecoins, as well as their impact on financial markets and consumer protection. Because, you know, why not throw a few more bureaucrats into the mix? 🤷‍♂️

The proposed framework also seeks to define who gets to play in the stablecoin sandbox, requiring issuers to be either insured depository institutions or qualified non-bank entities that meet a laundry list of capital, liquidity, and transparency standards. It’s like a VIP club, but instead of a bouncer, you have a whole committee of regulators checking IDs and making sure you’re not just some random guy with a laptop and a dream.

In a statement that could only be described as “optimistically bureaucratic,” Chairman Steil proclaimed,

“By implementing a clear regulatory structure for payment stablecoins, we can support continued innovation, bolster the U.S. dollar’s position as the world’s reserve currency, and protect consumers and investors. I look forward to getting feedback from consumers, issuers, and stakeholders on this draft legislation as we work to provide clear rules of the road for this innovative technology.”

Once this bill is passed (because who doesn’t love a good game of legislative hopscotch?), federal agencies will have 180 days to whip up some implementation rules, followed by an 18-month transition period before they start enforcing anything. So, basically, it’s like waiting for a bus that may or may not show up, but at least you’ll have a nice seat while you wait.

Regulating Stablecoins

This latest bill comes hot on the heels of a bipartisan group of US senators who introduced the Guiding and Establishing National Innovation (GENIUS Act). This act aims to regulate stablecoins while simultaneously promoting financial innovation—because nothing says “innovation” like a bunch of politicians trying to figure out how to regulate something they barely understand. 🙄

The GENIUS Act, sponsored by a motley crew of Republican Senators and one Democrat, defines stablecoins as digital assets pegged to the US dollar. It sets licensing and reserve requirements, ensuring that issuers with over $10 billion in assets must follow Federal Reserve regulations, while smaller firms can operate under state oversight. Because, of course, the smaller firms are the ones we really need to keep an eye on. They’re the wild cards in this digital poker game! 🃏

Read More

2025-02-08 01:04