The latest stablecoin bill is in the house and since no one wants to read through these entire bills we thought, why not make a quick summary of it. So Here’s the breakdown.
The bill titled “Clarity for Payment Stablecoins Act of 2023” (H. R. 4766) introduced in the 118th Congress aims to regulate payment stablecoins. Here are the key points from the bill:
- Definitions:
- Bank Secrecy Act: Refers to section 21 of the Federal Deposit Insurance Act (12 U.S.C. 1829b).
- Payment Stablecoin: A digital asset designed to be used as a means of payment or settlement. The issuer is obligated to maintain a stable value relative to a fixed amount of monetary value. It excludes national currencies and securities issued by registered investment companies.
- Limitation on Issuance: It is unlawful for any entity other than a permitted payment stablecoin issuer to issue a payment stablecoin for use in the United States.
- Requirements for Issuing Payment Stablecoins:
- Issuers must maintain reserves backing their payment stablecoins on a one-to-one basis. These reserves can include U.S. coins and currency, insured demand deposits, Treasury bills with a maturity of 90 days or less, repurchase agreements backed by such Treasury bills, central bank reserve deposits, and other assets deemed appropriate by regulators.
- Issuers must publicly disclose their redemption policy and establish procedures for timely redemption of outstanding payment stablecoins.
- Monthly composition of the issuer’s reserves must be published on their website.
- Prohibition on Rehypothecation: Reserves may not be pledged, rehypothecated, or reused, except for creating liquidity to meet redemption requests.
- Application Process for Issuers:
- The primary Federal payment stablecoin regulator can deny an application if they determine the activities of the applicant would be unsafe or unsound.
- Applicants denied can request a hearing to appeal the decision.
- If the regulator fails to render a decision within a specified time, the application is deemed approved.
- Limitation on Activities: Permitted payment stablecoin issuers can only issue and redeem payment stablecoins, manage related reserves, provide custodial or safekeeping services for payment stablecoins or their private keys, and undertake other directly supporting functions.
- Civil Penalties: Penalties are outlined for entities that issue payment stablecoins without approval, and for violations of the Act or related regulations.
- Interoperability Standards: The primary Federal payment stablecoin regulators, in consultation with the National Institute of Standards and Technology and other relevant entities, will assess and potentially prescribe standards for payment stablecoin issuers to promote compatibility and interoperability.
- Clarification: The bill clarifies that certain federal entities cannot restrict an individual’s ability to use digital assets for personal purposes or prohibit them from using hardware or software to facilitate their own custody or safekeeping of digital assets.