The adoption of the stablecoin law will be the first step in creating conditions for a secure market for digital assets, and will also support the competitiveness of the dollar. This is stated in the transcript of the speech of Circle CEO Jeremy Allaire.
The top manager will address members of the U.S. House of Representatives Financial Services Committee on “The Future of Digital Assets: Bringing Certainty to Their Ecosystem.”
According to Allaire, the time has come for Washington to lead the development of global rules that will determine how the dollar is used around the world. This is relevant in view of the decline in the share of currency in world reserves over the past eight years.
Circle CEO noted the growing demand for “safe and reliable dollars” on the Internet. It can scale to support billions of users and tens of trillions of dollars in payment activity with the right regulatory framework, Allaire added.
Threats to the US dollar
In the coming years, the yuan could undermine the dominance of the dollar thanks to the Beijing-controlled CBDC, Allair admitted. According to him, the failure of the United States to take appropriate measures can lead to devastating consequences for the country, he added.
“The stakes are too high to ignore”— emphasized the CEO of Circle.
According to Allaire, digital dollars should be freely and widely distributed for all legitimate purposes. To do this, they must be backed by liquid assets of the highest quality and without embedded investment and credit risks.
In this regard, the adoption of a law on stablecoins should be the first step in creating a regulatory framework that creates conditions for a dynamic and secure stablecoin market.
The transition to the stage of pre-signing the document by the president should be a priority. Allier pointed to the approval by the authorities of the EU, Japan and Hong Kong of similar legislation regulating, among other things, the use of dollar-denominated tokens. The U.S. needs to lead the development of global rules, CEO Circle said.
About the stablecoin law
Allaire cited the benefits of the bill before Congress:
- reliable banking supervision and issuer risk management;
- strict requirements for assets that can be used to back digital dollars;
- redemption and holding requirements for “stablecoins” to protect consumers;
- transparency, audit and reporting requirements;
- measures to ban the circulation of “fake” digital dollars by issuers who operate offshore and “do not play by the rules of the United States”;
- the role of both state and federal regulators in the supervision of issuers.
Problems for dollar stablecloins
CEO Circle urged legislators to pay attention to the remaining unresolved four issues:
The first is the role of banking regulators.
The top executive pointed to the US’s status as a laboratory for fintech innovation over the past 25 years, made possible by a broad government oversight system. In his opinion, it is necessary to ensure the spread of the status quo regarding regulated stablecoins.
“We need standards at the national level that will set the bar high for issuers with a federal or state license. […]. The solution is capable of providing a foundation for innovation in USD-denominated digital currency around the world.” Alair suggested.
The second question is related to reserves.
Circle believes that “stablecoin” issuers should be as secure as possible. In fact, the reserve requirement should provide more security than banks.
The bill recognizes this point by requiring stablecoins to be backed by dollar-denominated liquid assets at a 1:1 ratio. But this deprives issuers of payment “stablecoins” the ability to store even a small part of their monetary assets in Fedsaid the expert.
As a result, issuers will have no choice but to place all their cash in banks and other depository institutions, which could close and undermine confidence in digital dollars.
Additionally, requiring payment stablecoin issuers to access Fedwire through intermediary banks could unnecessarily risk concentrating customers within an uninsured deposit base, Allair said.
“A suitable solution is to grant individual and limited rights to issuers to access basic Fed account services.”said the CEO of Circle.
The third important issue is how financial institutions are required to hold payment stablecoins.
According to Allaire, stronger consumer protection is needed.
“It would be reasonable to require that any intermediary company for payment stablecoins undertakes to hold them with either a state or federally authorized qualified custodian, including trust banks”he suggested.
The fourth issue is countering “illegal digital dollars”.
CEO Circle noted the influx of dollar-denominated stablecoins whose operators are opaque, risk management and financial integrity uncertain. In some cases, such assets are specially designed in such a way as not to contradict the national interests and US law, the top manager emphasized.
“The bill should impose criminal penalties on stablecoin firms that knowingly issue ‘fake’ digital dollars in the US, to individuals in the US, or worldwide. […] Civil sanctions alone are far from enough to dissuade those with huge economic incentives from violating U.S. laws and undermining confidence in the dollar at home and abroad.” Alair recommended.
In closing, CEO Circle drew parallels to the popularization of the Internet in the 1990s, which led to the consolidation of US technological leadership. Unlike that period, the United States no longer has the former advantage and “such a luxury as time.”
“The dollar is at a crossroads. Currency competition has now turned into technological competition on the Internet. I ask all members of Congress to consider this moment.”Alair warned.
Pre-Version 3 of the Stablecoin Regulation Bill will be heard in Congress on June 13.
Recall that the first version was presented in April. In the original version, broad attention was paid to the activities of issuers and control over them.
Later, congressmen proposed an updated version of the document, which deprives the US Securities and Exchange Commission of jurisdiction over this asset class.
During congressional hearings, politicians criticized the bill for outdated data in preparation and insisted on updating the information for the next meeting.
Earlier, Allair called enforcement actions the main factor in reducing the capitalization of USDC. The top manager did not rule out the US losing its leading position in the sector in favor of the EU, Hong Kong and the UAE.
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