Yesterday there was a Congressional hearing on stablecoins where the differences between the Republican stablecoin Bill and the Democrat one were highlighted. Significant common ground exists, including strong reserve requirements, disclosures, audits and consumer protections. The biggest bone of contention is around the role of state regulators.
However, during the hearing of the Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion, a sensible path was proposed: to have a tiered approach as Singapore and the EU have done. Hence larger stablecoin issuers would be subject to direct Federal oversight, while smaller stablecoins could remain state regulated.
The primary Democrat concern is that state regulation could result in a race to the bottom so that fraudsters will pick a state with the most lax audit requirements. Delicia Reynold Hands from Consumer Reports argued that “in the same way there is a role for Federal regulators to approve state-chartered banks (that are members of the Fed), there has to be a role for the Fed to review applications and reject them if they don’t have certain requirements.”
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