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US senator proposes government-backed stablecoin insurance

“In order for bitcoin to flourish and survive, we need to provide the market more direction and confidence,” Josh Gottheimer stated.

Josh Gottheimer, a member of the House Financial Services Committee and a New Jersey Representative, has presented legislation to have the Federal Deposit Insurance Corporation support stablecoins in the same way it backs fiat deposits.

Gottheimer advocated identifying stablecoins issued by insured depository institutions or some nonbank issuers as “qualified” in a draught of the Stablecoin Innovation and Protection Act of 2022 unveiled on Tuesday. The bill indicates that “qualified stablecoins” are neither securities nor commodities under US law, and are redeemable on demand from the issuer under this definition.

The law would require the Federal Deposit Insurance Corporation, or FDIC, to establish a Qualified Stablecoin Insurance Fund in the case of nonbank issuers, ensuring that qualified stablecoin holders can swap their tokens for US dollars on demand. The bill is intended to protect holders from “systemic risk, fraud, and illicit financing,” according to Gottheimer.

“The expansion of cryptocurrencies has enormous potential benefit for our economy,” says the author “Gottheimer stated. “However, in order for cryptocurrency to flourish and thrive in the United States rather than elsewhere, we need to provide the market more direction and stability to help stimulate innovation and safeguard consumers.”

He continued, ”

“Innovation in the bitcoin business should not be stifled.” We must ensure that the necessary safeguards are in place and that our country remains a global leader in financial technology.”

Aside from the insurance requirements, the Office of the Comptroller of the Currency will essentially have regulatory responsibility for stable coin issuers, determining standards and regulations. The Securities and Exchange Commission and the Commodities Futures Trading Commission, on the other hand, are “not precluded from scrutinizing non-qualified stablecoins and other cryptocurrencies” under the bill, according to Gottheimer.

The Blockchain Association and the Digital Chamber of Commerce, among other crypto advocacy groups, have stated their support for the bill. The bill, according to Teana Baker Taylor, chief policy officer of the Digital Chamber of Commerce, leveled the playing field between “existing stablecoin arrangements and new entrants” while also putting the United States on the way to a clearer regulatory framework for digital assets.

The stable coin plan would take effect after one year if both the House and Senate approve it and President Biden signs it into law. The Senate Banking Committee will host a hearing on Tuesday to look at the report on stablecoins provided by the President’s Working Group on Financial Markets in November.

 

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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