New Jersey Rep. Josh Gotteheimer, a member of the Democratic Party, disclosed an early draft of legislation aimed at placing reports around stablecoins. Legislation is focused on engraving authorized stablecoins out from more volatile cryptocurrencies.
Putting more suitable protections in place for consumers and investors is one of the main goals. The other important thing that the law would help with is supporting fintech innovation in the US.
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Critics believe defenselessness to manipulation, bad actors, and failure is the result of insufficient reserve capital. Gottenheimer thinks that digital currencies should only be entitled as stablecoins if they can be redeemed on a head-to-head basis for US dollars.
OCC, which stands for The Office of the Comptroller of the Currency would have supervision of stablecoin issuers and issue rules on leverage ratios, anti-money laundering, along with other surveillance. OCC believes that it is important to know how dollars transfer and move in the 21st century.
Major changes on the horizon for the financial sector and central banks
The qualified stablecoins could be issued by banks or non-bank institutions. That would only be possible if they pass and satisfy specific regulations that have been proposed.
Stablecoins suggest they can be used freely as non-digital money. Though their main purpose is to make trading easier and in some cases to hide assets in digital markets. Many believe that stablecoins could become a foundation for payment and all financial services.
One of the goals of stablecoins was to attempt and offer price stability. In order to do so, they would need to be backed up by the reserve asset. While trying to bring the best from both worlds, which is security and instant refining and processing, stablecoins have gained traction.
Stablecoins should be backed up by cash or cash equivalents
Nellie Liang, Cynthia Lummis, and Dante Disparte supported Gottheimer’s plan. Senator Lummis believes that stables should be backed up by cash or other cash coequals. She also mentions that some of the stablecoins are not always entirely backed up by suitable assets. It is important to make new market prospects by her beliefs.
Dante Dispare has the role of Circle’s Chief Strategy Officer. He believes that legislation could potentially be a risk-related procedure but worth trying.
Gottheimer says that cryptocurrency, in general, has a lot of potential value for the economy of the US and the rest of the world. That’s why it has to be provided more guidance and assurance to the marketplace. This would help protect consumers and stimulate innovation. He also mentioned that he wants to encourage cryptocurrency by releasing Stablecoin Innovation and Protection Act.
The legalization could help protect Americans from terrorism and bad predatory entities. The USA needs to ensure there are proper safeguards and that the nation is being led towards better financial technology.
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