The Ever-Dwindling Chances for a Stablecoin Law

Last
week,
U.S.
Senators
Cynthia
Lummis
(R-Wyo.)
and
Kirsten
Gillibrand
(D-N.Y.)
introduced
a
joint
bill
addressing
how
stablecoins
could
be
regulated
in
the
country.
It’s
the
latest
effort
to
try
and
get
something
done
in
the
U.S.
legislative
front
–
but
is
it
enough?

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Last
week,
U.S.
Senators
Cynthia
Lummis
(R-Wyo.)
and
Kirsten
Gillibrand
(D-N.Y.)

introduced
their
latest
joint
bill,
this
time
taking
on
stablecoins,
the

$160
billion
section
of
the
overall
crypto
market
that’s
received
a
fair
amount
of
attention
recently
–
and
is
seen
as
the
area
where
crypto
legislation
is
most
likely
to
actually
happen.
Which
still
isn’t
all
that
likely.

The
new

Lummis-Gillibrand
bill
is
a
lengthy
proposal
detailing
how
stablecoins
issued
by
U.S.
companies
would
be
overseen,
how
they
could
maintain
their
peg
(algos
are
out)
and
how
consumers
might
be
protected.

The
new
Lummis-Gillibrand
bill
creates
a
framework
for
state
and
federal
oversight
of
stablecoin
issuers,
details
a
Federal
Deposit
Insurance
Corporation
(FDIC)
process
for
possible
collapses
and
bans
algorithmic
stablecoins
outright.

Industry
participants
voiced
a
few
immediate
concerns
about
the
new
Lummis-Gillibrand
bill,
pointing
to
a
lack
of
provisions
accounting
for
crypto-backed
tokens
like
DAI
and
the
blanket
ban
on
algorithmic
stablecoins.

The
bill
has
a
comprehensive
list
of
rules
for
stablecoins
issued
by
U.S.
companies
but
is
far
more
limited
in
addressing
foreign
company-issued
tokens,
like
Tether
(USDT).
A
press
release
announcing
the
bill
said
“malign
actors
will
no
longer
have
the
option
to
use
unregulated
foreign
stablecoins.”

At
first
blush,
there
doesn’t
appear
to
be
a
specific
mechanism
that
would
actually
block
them
from
doing
so.

My
colleague
Jenn
Sanasie
asked
Sen.
Lummis
on

CoinDesk
TV
whether
there
was
a
specific
mechanism
that
would
prevent
issuers
based
outside
the
U.S.
from
tapping
U.S.
customers.

“This
is
very
much
oriented
towards
a
U.S.-regulated
company,
and
so
Tether,
if
it
chooses
to
remain
offshore
[and]
is
happier
with
a
different
regulator,
that’s
a
business
choice
for
them,”
she
said.
“But
if
they
want
the
U.S.
Good
housekeeping
stamp
of
approval
on
their
product,
and
we
hope
they
will,
then
they’ll
come
into
compliance
in
the
U.S.”

Tether
issues
the
world’s
largest
stablecoin,
the
eponymous
tether
(USDT),
with
$110
billion
worth
of
tokens
in
circulation
according
to
CoinGecko.
It’s
also
the
most
liquid,
with
CoinGecko
reporting
some
$38
billion
in
24-hour
volume
(the
next
largest
stablecoin
by
market
cap
is
Circle’s
USDC,
with
$34
billion
worth
of
tokens
circulating
and
$6
billion
in
24-hour
volume).
(I
reached
out
to
Tether
spokespeople
for
comment,
but
haven’t
heard
back.)

Circle,
as
it
stands
today,
wouldn’t
be
able
to
continue
operating
–
there’s
a
$10
billion
limit,
above
which
stablecoin
issuers
would
need
to
be
state
or
federally
chartered
depository
institutions.

Lummis
said
she
wanted
the
company
to
look
at
the
bill
and
determine
how
its
compliance
practices
might
need
to
change
to
fit.

“They
probably
have
to
get
a
federal
charter,
to
be
honest,”
she
said.

It’s
also
unclear
to
me
how
exactly
this
bill
might
treat
stablecoins
like
DAI,
which
is
issued
by
a
decentralized
entity
but

isn’t
an
algorithmic
stablecoin.

Time
will
tell
where
and
how
this
bill
will
proceed.

The
other
major
effort
that
seems
to
be
underway
comes
from
the
House
Financial
Services
Committee,
with

reports
saying
Chair
Patrick
McHenry
(R-N.C.)
and
Ranking
Member
Maxine
Waters
(D-Calif.)
met
with
Senate
Majority
Leader
Chuck
Schumer
(D-N.Y.)
to
discuss
attaching
a
stablecoin
bill
to
some
other
piece
of
legislation.
It’s
unclear
just
what
the
current
version
of
the
House
bill
looks
like
(neither
McHenry’s
nor
Waters’
spokespeople
responded
to
requests
for
comment).

And
perhaps
most
intriguingly,
Senate
Banking
Committee
Chairman
Sherrod
Brown
(D-Ohio)

said
he
could
support
a
bill
if
it
addressed
consumer
protection
questions
and
had
appropriate
guardrails
(spokespeople
for
Brown
also
didn’t
return
a
request
for
comment).

But
of
course,
of
course,

of
course,
the
clock
is
ticking.
Lawmakers
are
already
full
swing
in
campaign
mode.
As
we
get
to
the
summer,
the
chances
of
elected
officials
taking
time
off
from
the
campaign
trail
for
something
as
esoteric
as
stablecoins
will
be
low.
Any
progress
made
will
grind
to
a
halt
(and
that’s
assuming
we
don’t
suddenly
have

another
House
speakership
vacancy,
though
an
effort
to
oust
Mike
Johnson

seems
to
be
wilting).

The
more
likely
scenario
is
we
may
see
passage
during
the
lame-duck
session,
between
the
election
and
before
the
next
Congress
is
sworn
in.
Even
there,
any
bill
would
be
attached
to
some
must-pass
piece
of
legislation,
in
all
likelihood.
This
might
be
the
next
National
Defense
Authorization
Act
or
some
kind
of
budget
bill.

How
the
stablecoin
legislation
efforts
might
evolve
between
now
and
then
is
anyone’s
guess,
though
with
McHenry
on
his
way
out
–
he’s
not
running
for
reelection
–
and
Brown
and
Schumer
apparently
on
board,
there
is
still
a
better-than-negligible
chance
we
will
see

a
bill
become
a
law
by
January.

If
you’ve
got
thoughts
or
questions
on
what
I
should
discuss
next
week
or
any
other
feedback
you’d
like
to
share,
feel
free
to
email
me
at

nik@coindesk.com
or
find
me
on
Twitter

@nikhileshde.

You
can
also
join
the
group
conversation
on

Telegram.

See
ya’ll
next
week!