© Reuters
Investing.com – The stablecoin bill introduced in Congress requires the Federal Reserve and state banking regulators to approve all stablecoin projects by non-bank entities before they can be legally issued.
Issuers of stablecoins approved by state regulators will need to register with the Federal Reserve within 180 days in order to legally continue operations.
This stablecoin bill had been delayed for over a month due to a last-minute change suggested by Treasury Secretary Janet Yellen. She argued that the legislation should provide for the segregation of the assets of clients of portfolio custodians in order to preserve them in a bankruptcy scenario.
Prohibition of algorithmic stablecoins
New stablecoins backed by assets created by the same issuers or “endogenously backed stablecoins” will not be allowed for at least the next two years. All existing stablecoins will have to change their business model and receive a new approval from the relevant authorities within two years.
Stablecoins issued without the approval of designated regulators will be illegal and subject to up to five years in prison and a $1 million fine. The bill provides that these cryptocurrencies must be backed by cash or highly liquid assets such as Treasury bonds.