The US Congress proposed converting stablecoins into the equivalent of public money. The lawmakers recommend introducing a Central Bank digital currency and imposing taxes on stablecoins.
The Federal Reserve and Congress are on the task force of President Joe Biden’s administration. They recently released a document urging to regulate the use of stablecoins in the United States.
Caitlin Long said that the committee’s deliberations on that issue are still likely to continue. That Twitter user is a Bitcoin advocate and finance expert with over 20 years of experience at Wall Street.
According to the document, the government plans to convert stablecoins into the equivalent of public money. Banks insured by the Federal Deposit Insurance Corporation should be in charge of issuing it. Additionally, the US Treasury or reserves of the Central Bank should back each of the stablecoin icons. They are also planning to introduce a central bank digital currency and impose taxes on private stablecoins.
The publication concludes that innovation exceeds regulation, creating an uneven playing field. For that reason, it is easier and cheaper for technologically advanced companies to offer similar products and services.
Likewise, it reviews the history on this subject, noting that the problems associated with the production of money are like fifty years ago. First, it mentions the use of banknotes from private banks as a relevant aspect.
In the 19th century, more than a dozen American banks created private notes that served as legal tender. Some problems with its operation led the US government to take control of the then monetary system. For that reason, they created the current national fiat currency of the United States.
Finally, the document adds that people seem to be currently using stablecoins as money. However, their prices are independent of geography but not of the perceived risk of their supporting assets. In that respect, they are very similar to the old private banknote system.
US Legislators Will Adjust the Regulations on Stablecoins
The report outlines new legislation for the United States to stop using one-to-one parity with stablecoins and the US dollar. That is what it is currently doing, using international reserves.
The document proposes to pass a law for stablecoin issuers to become Banks insured by the Federal Deposit Insurance Corporation (FDIC). The authors believe that Congress could adopt various regulations and oversight activities to do this.
However, some lawmakers argue that the banking statutes would be too cumbersome as stablecoin issuers only operate in the money market. Besides, they have also proposed subjecting these financial institutions to the regulations corresponding to a narrow banking statute. That means limiting their assets to reserves of the Central Bank or US Treasuries in the short term.
The US Congress also contemplates applying a more aggressive and comprehensive approach. That would include stablecoin issuers and the banking sector that has created flawed regulatory arbitrage for decades. In this way, they could adapt to technological development that would modify some current economic concepts. For all these reasons, they believe that it is mandatory to have a regulatory framework for stablecoins.
By Alexander Salazar