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Highlights
- Fed Chair Powell supports passing stablecoin legislation by year's end.
- Lummis-Gillibrand Payment Stablecoin Act aims to regulate US dollar-linked crypto.
- Coin Center opposes bill, citing impact on innovation and free speech.
During a recent congressional hearing, Federal Reserve Chair Jerome Powell has expressed a keen interest in the passing of stablecoin legislation before the year ends.
Federal Reserve’s Commitment to Stablecoin Regulation
The Chairman of the Federal Reserve, Jerome Powell, has recently come out in support of stablecoin regulation. In response to a question from Representative Wiley Nickel, Powell stated that the Federal Reserve remains open to working with Congress on stablecoin regulation.
”We have been quite happy to be part of this process and appreciate being involved. It is crucial for us to have a appropriate framework for stablecoins and we are fully committed to assist you in achieving this,” said Powell.
This commitment underlines the need to create a legal framework for the provision of stablecoin services to enhance the stability and security of the transactions within the United States. This will now be followed by the legislative process in which several financial regulators as well as lawmakers will play an active role.
Bipartisan Effort for Regulatory Framework
The Lummis-Gillibrand Payment Stablecoin Act was proposed by Senators Cynthia Lummis and Kirsten Gillibrand back in April as a comprehensive bill to regulate payment stablecoins. The concept of this bipartisan bill is to regulate the market in a way that will protect consumers and promote innovation without threatening the supremacy of the dollar.
The new legislation replaces the 2022 Responsible Financial Innovation Act (RFIA) with a focus on payment stablecoins regulation.
According to the new bill, a “payment stablecoin” is any crypto asset that is designed to be used as a medium of exchange or a means of payment and is either redeemable for a fixed amount of US dollars or has a stable value equivalent to the US dollar. The bill does not cover stablecoins that are pegged to non-US dollars or other forms of assets.
Backlash and Support
The introduction of this bill has garnered both support and criticism from the financial and tech sectors. While some have applauded it as a means of bringing sanity to the industry and protecting the consumers, others have raised apprehension on the possible negative impact on innovation.
Additionally, the proposed stablecoin regulation has also raised questions on its impact on First Amendment rights. Coin Center, a crypto advocacy group, has opposed the bill claiming that the ban on algorithmic stablecoins is problematic.
Jerry Brito, the CEO of Coin Center applauded the government for seeking to regulate stable coins but had some concerns on how the bill would affect innovation and speech.
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