The US House Committee on Financial Services will conduct a hearing on April 19 to evaluate the role of stablecoins as a means of payment and determine whether the payment ecosystem needs supporting legislation. The hearing, titled “Understanding Stablecoins’ Role in Payments and the Need for Legislation,” will focus on various stablecoins and their use in the payments landscape. The committee will explore the need for stablecoin legislation based on their underlying collateral structures.
The hearing will include information collected by various federal government agencies over the last year. Participants testifying at the hearing include Circle’s chief strategy officer and head of global policy, Dante Disparte. Circle’s in-house stablecoin offering, USD Coin (USDC), will likely be discussed, as it recently depegged from the US dollar after it revealed it had $3.3 billion of funds stuck at the collapsed Silicon Valley Bank (SVB). However, following a bailout of SVB depositors by the US government, USDC repegged its value to the US dollar.
During the period when USDC depegged, hackers managed to gain access to Disparte’s Twitter account and started promoting fake loyalty rewards to long-time users of USDC. This situation highlights the potential risks of stablecoins and underscores the importance of legislation to ensure digital dollars on the internet are safely issued, backed, and operated.
Just days before the upcoming hearing, a draft bill providing a framework for stablecoins in the United States was published in the House of Representatives document repository. Speaking about the draft bill, Circle’s CEO Jeremy Allaire said, “There is clearly the need for deep, bi-partisan support for laws that ensure that digital dollars on the internet are safely issued, backed and operated.“
The draft bill proposes that stablecoin issuers must obtain a banking charter and comply with all applicable banking regulations. The bill also seeks to define what constitutes a stablecoin and outlines the requirements for maintaining a stablecoin’s peg to an underlying asset. If passed, this bill could provide regulatory clarity and stability for the stablecoin industry.
In conclusion, the upcoming hearing on stablecoins is an essential step toward ensuring the safety and stability of the payment ecosystem. The hearing will provide lawmakers with the necessary information to make informed decisions about the need for stablecoin legislation. The recent draft bill provides a framework for stablecoins in the United States and could provide regulatory clarity for the stablecoin industry if passed. As the use of stablecoins continues to grow, it is crucial to have clear regulations to ensure the protection of consumers and the stability of the financial system.
