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Worldwide, drafts concerning cryptocurrency laws are being prepared, but the process is prolonged due to the complexity of the field. The situation in the US is more complicated because the final draft discussions have been shelved due to the upcoming November elections. The rules, expected to be completed and approved months ago, are still in the evaluation stage, left where they were.
US Cryptocurrency Law
Senators are working on some drafts despite the upcoming elections. For example, steps were taken in October incidents regarding the use of crypto in money laundering. Now, US Senators Kirsten Gillibrand and Cynthia Lummis announced another legislative draft today. The bill requires issuers of stablecoins to use cash or cash equivalent assets as backing for their tokens.
The issue of reserves had caused intense debates, and following the collapse of BTC and LUNA-backed UST in 2022, algo stablecoins and crypto reserve-backed tokens became the focus of criticism. However, Ethena continues to grow its BTC-backed stablecoin these days.
Details of the Crypto Bill
According to this bill, algo stablecoins are being banned. Additionally, the bill aims to protect issuers and stablecoin users from illegal and unauthorized uses such as money laundering. Senator Gillibrand recently stated;
“Regulatory framework for stablecoins is absolutely critical to maintain the dominance of the US dollar, promote responsible innovation, protect consumers, and prevent money laundering and illegal financing.”
Although all details of the prepared draft have not yet been shared, there are rules that protect the dual banking system. Thus, a legal framework is being introduced at both federal and state levels. The Lummis-Gillibrand Payment Stablecoin Act will give federal and state institutions the authority to create and operate stablecoins.
One of the most important details is the protection of investors following the bankruptcy of stablecoin issuers. In such a case, the Federal Deposit Insurance Corporation is allowed to take conservatorship and resolve the situation.
“Under FDIC, a detailed custodian regime has been established for all payment stablecoin issuers, including the priority of claims, validity of claims, and classification of payment stablecoins as customer assets, not the issuer’s assets. Crypto assets are continuously evolving, and as the sector changed last year, Senator Gillibrand and I worked to develop our legislation to allow continued innovation while appropriately balancing consumer protections. Make no mistake, there are bad actors, but we cannot overlook the potential of crypto assets and distributed ledgers to modernize our financial sector.”
