New Regulation for Stablecoins in the USA to Protect Consumers
On Dec 03, 2020
US lawmakers proposed a new regulation to protect consumers from the risk associated with cryptocurrencies, especially stablecoins.
Congresswoman Rashida Tlaib, Congressmen Jesús García, and Chairman of Task Force on Financial Technology Rep. Stephen Lynch introduced the “Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act.” The purpose of this proposal is to protect the consumer from the risks they may experience while buying and selling cryptocurrencies. In the article, they give examples of Facebook’s Libra, which rebranded to Diem and other stablecoins. As they pegged to some traditional currency such as the US Dollar, they need further monitoring to be accepted as a medium of exchange, which may cause some monetary problems.
The Stable Act can help to solve the risks such as liquidity and credit risk. As the COVID-19 caused malfunctioning in the financial intermediaries, the cryptocurrencies served as a cheap and fast solution for people with low and medium income. This widespread usage of stablecoins may cause some unexpected harm to users. According to the press release, the Stable Act addresses these topics:
- Require any prospective issuer of a stablecoin to obtain a banking charter;
- Require that any company offering stablecoin services must follow the appropriate banking regulations under the existing regulatory jurisdictions;
- And require that any stablecoin issuers obtain FDIC insurance or otherwise maintain reserves at the Federal Reserve to ensure that all stablecoins can be readily converted into United States dollars, on-demand.
- Require that any company or bank issuing a stablecoin to notify and obtain approval from the Fed, the FDIC, and the appropriate banking agency 6 months before its issuance and maintain an ongoing analysis of potential systemic impacts and risks;
Reaction from the Crypto Community
The cryptocurrency community did not welcome the regulation for the stablecoin. Many tweets were protesting the Stable Act. Meltem Demirors, the Chief Strategy Officer of CoinShares, commented about the opposite effect of this act.
this has the OPPOSITE effect
cryptocurrencies LOWER the cost of servicing populations that have historically been excluded from the banking sector. raising costs and compliance obligations forces companies to cut access for unprofitable clientele.
please, no more clowning ? https://t.co/IbjqXJpT4F
— Meltem Demirors (@Melt_Dem) December 2, 2020
The community thinks that regulating the field which belongs to the decentralized world is not a good idea. The application of regulation may be beneficial for users buy they protest too. Companies will hurt by the supervision, and they may even think about leaving the USA market as was the case with BitLicense.
#coinsfera #cryptonews #buybitcoinistanbul #buybitcoindubai
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