A Member of “The Squad” Wants To Regulate Cryptocurrency — Will It Work?
It is important to balance the need to protect the community while still allowing for innovation and creativity to thrive.
Wall Street is still struggling to make heads or tails of economic policy during this whirlwind presidential transition, but news of a proposed “Stablecoin Classification and Regulation” bill, introduced last week by US Representative Rashida Tlaib, has put the digital assets industry on edge. Tlaib, a progressive first-term lawmaker, and member of the so-called “squad” of left-leaning congresswomen, cosponsored the bill requiring stablecoins to be issued by banks, which means that issuers would be subject to many of the same government regulations to which banks currently subscribe.
A statement issued by Congresswoman Tlaib’s office clarifies that the bill is intended to protect consumers by treating stablecoins like deposits, and will create a layer of regulatory oversight aimed at protecting lower-income consumers from falling prey to dishonest lenders and crypto scammers.
Stablecoins, since their inception, have always been free from government interference and maintained their value and independence with a peg to fiat currency or exchange-traded commodities like gold. Tlaib’s bill would require issuers to secure bank charters and regulatory approval before circulating stablecoins, which would limit the independence of the asset, cripple competitive advantage, and essentially render the asset another Treasury-backed fiat currency.
Proposing a wholesale realignment of currency policy has naturally met with widespread resistance. Brian Brooks, the acting US comptroller of the currency who was recently nominated by President Trump for a five-year term, describes the bill as “a solution searching for a problem.” He says some of the provisions, such as ensuring adequate reserves and the ability to redeem stablecoins for dollars, can be handled without requiring issuers to become banks, which he argues would stifle competition. “What if email got invented and somebody said only the post office can issue email accounts?”
Furthermore, insiders argue that the bill actually does more harm than good. “The potential policy they are creating doesn’t have community input,” said Olayinka Odeniran, chairwoman of the Black Women Blockchain Council in an interview. “This will limit the amount of stablecoins out there that people from my community can use to onboard into the space. And it will limit the companies that are interested in using them to serve underprivileged or underbanked minorities.”
Here’s what I think about the bill:
Will such a bill pass in the tumultuous final weeks of the Trump administration, asks Wired magazine? “Not likely, says Judith Rinearson, a law partner at K&L Gates who closely follows fintech regulation. “But it’s a sign of where the winds are blowing,” she says. The legislators plan to reintroduce a version of the bill next year.”
Facing a Covid-rattled business community, a polarized electorate, and a mandate to energize the economy to avoid a full-scale global depression, it’s unlikely that President-elect Biden will prioritize such a far-reaching policy within his first year in office. In addition, the bill would have to pass a Republican Senate unlikely to pass laws designed to disrupt the economic status quo. However, as the shifting sands of the economy become more settled in the years ahead, these types of measures might end up having a real impact on our financial future. It’s one we’ll certainly be keeping an eye on.
It is important to balance the need to protect the community while still allowing for innovation and creativity to thrive, this is why we need to focus on ensuring new laws direct industry participants to act in the best interests of their depositors instead of trying to apply old laws and regulations to try and prevent bad actors from taking advantage of the new opportunities.