House Republicans are proposing new draft legislation that would limit the Securities and Exchange Commission's (SEC) jurisdiction over payment stablecoins.
The proposed bill shifts the oversight of stablecoins to federal and state bank and credit union regulators, The Block reported.
The move follows criticism of SEC Chair Gary Gensler's approach to digital assets by industry executives and congressional Republicans.
The new bill focuses solely on stablecoins used for payments and would subject nonbank stablecoin issuers to regulatory examinations.
It would also require every stablecoin to be backed by legal tender or short-term Treasury bonds and mandate a monthly reporting requirement with a certified public accounting firm.
States could approve stablecoin issuances using their own standards, but the bill sets a floor for state regulators for evaluating projects.
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The Federal Reserve can also halt projects, even if approved by a state, if the stablecoin does not meet those baseline criteria.
Issuing a stablecoin without regulatory approval could result in criminal, as well as civil, penalties, and stablecoin issuers would be subject to anti-money laundering and know-your-customer requirements, similar to a bank.
The bill allows for stablecoin issuers waiting on full approval from regulators to be granted a preliminary green light to start issuing stablecoins for up to a year while being evaluated.
In the event of bankruptcy, payment stablecoin holders would be treated preferentially for reimbursement.
This proposed legislation is intended to be a companion piece to legislation that would govern digital asset markets. Republicans characterized the bill as a conversation starter and have shared it with the Democratic staff of the House Financial Services Committee and the Biden administration.
Any digital asset-related bill will need bipartisan support to become law, due to the Republican majority in the House of Representatives and the Democratic majority in the Senate, as well as the required sign-off from President Joe Biden.
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