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Josh Gottheimer introduces a bill to define boundaries for Stablecoins

Updated: Jul 25, 2024
Published: Feb 15, 2022
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On Tuesday, New Jersey Rep. Josh Gottheimer introduced a bill aimed at placing definitions around Stablecoins.

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Qualified Stablecoins

The discussion draft, released Monday by Gottheimer's office, proposes designing certain digital currencies as "qualified" Stablecoins if buyers can exchange them one-for-one for U.S. dollars. Qualified Stablecoins could be issued by either a government-backed bank or a non-bank that agrees to hold at least 100% reserve assets consisting of U.S. dollars, U.S. debt, or other assets that the Office of the Comptroller of the Currency considers adequate cash collateral.

Gottheimer told CNBC that Nellie Liang, a Treasury undersecretary who is leading the regulatory effort, supported his plan when she appeared before the House Financial Services Committee last week. Gottheimer's bill, on which input is still being sought from Capitol Hill and the crypto industry, will likely be the first of many attempts by Congress and the Biden administration to structure the stablecoin market.

Regulators have taken note of Stablecoins

Stablecoins are a rapidly growing and evolving aspect of the crypto space. In 2021, the stablecoin market experienced significant growth, with the supply of dollar-backed cryptocurrencies increasing by 388%, and this acceptance has led U.S. government officials to seek regulation of Stablecoins. For example, in November, the Biden administration called on Congress to enact a host of laws and work with other regulators to ensure that Stablecoins do not pose a systemic risk.

The reason for this caution is that issuers hold a pool of dollars to back the value of the digital token, and regulators feel that it is not always clear whether they can guarantee 100% of redemption requests for traditional fiat currencies. Some policymakers fear that a surge in redemption requests or a stablecoin "run" could lead to issuer bankruptcy and trigger a domino effect of insolvency.

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