New bill proposes US Treasury to have full authority over fiat stablecoins
A new bill introduced by United States House Democrat Don Beyer of Virginia has proposed a far-reaching regulatory and legal framework for digital assets across the board.
Entitled "The Digital Asset Market Structure and Investor Protection Act of 2021," the bill touches on virtually all the important grey areas that continue to exist regarding cryptocurrencies in the U.S. context.
One of its primary goals is to establish statutory definitions for digital assets and digital asset securities, bringing the former under the purview of the Commodity Futures Trading Commission (CFTC) and the latter under that of the Securities and Exchange Commission. Both the SEC and CFTC would be tasked with providing legal clarity regarding the regulatory status of the top 90% of crypto assets by market cap and trading volume.
Moreover, the bill seeks to formalize regulatory requirements for all digital assets and digital asset securities under the Bank Secrecy Act, classifying both as “monetary instruments” in order to strengthen transparency, reporting and anti-money laundering enforcement.
When it comes to central bank digital currencies, the bill seeks to pave the way for the Federal Reserve to issue a digital dollar by explicitly designating it as the only institution with authority to do so. Notably, it calls for the U.S. Treasury Secretary to have the power to either permit or prohibit U.S, dollar and other fiat-based stablecoins.
Details of the proposed investor protection measures include requiring the Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), and Securities Investor Protection Corporation (SIPC) to issue explicit clarifications as to the “non-coverage” of the digital asset sector so that investors are clearly aware their assets are not insured in a similar manner to traditional bank deposits or securities.
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To prevent fraud, the bill proposes that any digital assets that are not recorded on a public distributed ledger within 24 hours should be reported to a CFTC-registered digital asset trade repository. The text of the bill defines the latter as follows:
“The term ‘digital asset trade repository’ means any person that collects and maintains information or records with respect to transactions or positions in, or the terms and conditions of, contracts of sale of digital assets [...] entered into by third parties (both on-chain public distributed ledger transactions as well as off-chain transactions) for the purpose of providing a centralized recordkeeping facility for any digital asset.”However, the term does not mean the private or public ledger itself nor its operator unless it or they seek to aggregate/include off-chain transactions as well.
As reported, Treasury Secretary Janet Yellen has recently told financial regulators that the government needs to act quickly to establish a regulatory framework for stablecoins, noting that they pose possible risks to end-users and could have a wider impact on the country's financial system and national security.