Senator Bill Hagerty (R-TN) has recently introduced a new bill called the Clarity for Payment Stablecoins Act of 2024. This bill aims to create clear rules for stablecoins – a type of digital currency that is designed to keep a steady value, usually tied to traditional money like the U.S. dollar.
The bill aims to clarify the management and issuance of stablecoins. By establishing clear rules, it seeks to foster innovation in digital currency while ensuring consumer protection.
Stablecoins are cryptocurrencies that maintain a stable value by being tied to assets like national currencies or commodities, minimizing the volatility seen in other cryptocurrencies.
A significant aspect of the bill is its approach to different sizes of stablecoin issuers. Companies issuing less than $10 billion in stablecoins can adhere to state regulations instead of federal ones, facilitating market entry for smaller businesses without excessive federal oversight.
In contrast, companies issuing more than $10 billion in stablecoins will need approval to continue operating under state regulations.
An essential part of the bill mandates that stablecoin issuers back their digital currencies with real assets on a one-to-one basis. This means for every stablecoin issued, an equal amount in safe assets like U.S. dollars or Treasury bills must be held. To build trust, issuers are required to provide monthly proof of their reserves.
Check out: $1 million in XRP donated to Kamala Harris’s campaign by Ripple’s co-founder
The bill also emphasizes consumer protection by ensuring issuers keep customer funds separate from their own. This prevents the misuse of customer money and enhances market security.
In terms of regulation, the bill designates specific roles to government agencies. The Federal Reserve will regulate banks issuing stablecoins, while the Office of the Comptroller of the Currency (OCC) will oversee non-bank issuers. This framework aims to establish a balanced regulatory system tailored to stablecoins.
Senator Hagerty believes this bill will not only support the growth of stablecoins but also boost demand for U.S. Treasuries, addressing national financial challenges. He highlights that clear regulations are crucial for unlocking the full potential of stablecoins for Americans.