- April 01, 2022
A Newly Newly Introduced Bill Aims to Bring Transparency to the Stablecoin Marketplace.
The days of shady stablecoin reserves may be coming to an end shortly.
On Thursday, Rep. Trey Hollingsworth (R-Indiana) and Sen. Measure Hagerty (R-Tennessee) filed a bill in both the House and Senate targeted at increasing transparency in the stablecoin market.
The "Stablecoin Transparency Act" would establish requirements for the "quality of assets held in reserves" and require stablecoin issuers to disclose their reserves.
If passed, the measure would have a big influence on stablecoin issuers like Circle and Tether, whose support has been the subject of a lot of conjecture in the crypto world.
Tether, by far the largest stablecoin issuer, has kept its reserves a closely guarded secret. The corporation has reneged on pledges to conduct reserve audits and has fought tooth and nail to keep information hidden from the public.
The now-$180 billion stablecoin industry has also become a concern for regulators, many of them have expressed concerns about the broader economy's vulnerability risks if stablecoin issuers experience a "run."
Legislators are now attempting to develop a solution that protects consumers and the economy while still encouraging innovation. Hollingsworth sees his bill as a positive step forward.
"This bill will not fix all of our problems," Hollingsworth told CoinDesk. "However, it is a little step toward the uncovering of a balanced approach to development, technology, and consumer protection."
The outpouring of support for the proposed bill, both from fellow politicians and industry participants, has astounded Hollingsworth.
"Even in its early stages of introduction, we've already received enormous enthusiasm for how this is a thoughtful first step," Hollingsworth added.
Whether the bill passes or not, Hollingsworth believes it will provide stablecoin issuers a sneak peak at where Congress is headed with stablecoin regulation.
"Even presenting and dropping this to Congress sends a signal to industry," Hollingsworth told CoinDesk. "They can start making judgments and taking steps in the same direction."
Hollingsworth wants to make sure that "positive actors" in the stablecoin space — those who care about regulatory compliance – get the information they need to make informed decisions regarding investments, regulation, and how to advance the technology.
"Excellent actors in space want to see bad actors removed from the space, barred from performing in space, so that one poor actor does not tarnish the entire industry's good name and efforts," he stated.
Despite Hollingsworth's refusal to name the stablecoin issuer he considers a "bad actor," other lawmakers, like crypto-friendly Rep. Warren Davidson (R-Ohio), have pointed fingers at Tether.
Despite the fact that most stablecoins are pegged to the US dollar, Hollingsworth felt it was important to create a bill with a broad scope.
"We're collaborating as far as possible with business and consumers throughout the world to ensure we provide a thoughtful framework," Hollingsworth added. "To be honest, that's one of the reasons the law isn't dollar-specific."
"I don't want to be behind the curve when this measure is approved and then have to change it to reflect the various currencies in which stablecoins are being issued," he added.
Even if the bill is passed, the additional restrictions will not be implemented right away.
"Agencies must carry out the legislation passed by Congress," Hollingsworth added. "However, I believe the effect will be immediate because everyone is aware that this will become law." As a result, even before the enforcement, everyone begins to comply."