The days of murky stablecoin reserves might soon be over.
Two U.S. lawmakers, Rep. Trey Hollingsworth (R-Indiana) and Sen. Bill Hagerty (R-Tenn.), introduced a bill in both the House of Representatives and Senate on Thursday aimed at bringing greater transparency to the stablecoin marketplace.
The aptly named “Stablecoin Transparency Act” would set standards for the “quality of assets held in reserves” as well as require stablecoin issuers to report on their reserves.
If passed, the bill would have a significant impact on stablecoin issuers including Circle and Tether, whose stablecoins' backing has been the source of much speculation in the crypto industry.
Lawmakers are trying to find a solution that protects consumers and the economy without stifling innovation. Hollingsworth sees his bill as a step in the right direction.
“This bill isn't going to solve everything,” Hollingsworth told CoinDesk. “But it is an incremental step towards the unveiling of a balanced approach between development, technology and protection of consumers.”
Hollingsworth said he’s been amazed by the outpouring of support for the new bill, both from fellow lawmakers and industry participants.
“Even in its infancy of being introduced, we've just seen tremendous support on how this is a really thoughtful first step,” Hollingsworth said.
Good actors vs. bad actors
Hollingsworth believes the bill, whether it eventually passes or not, will give stablecoin issuers a sneak peek at where Congress is headed with stablecoin regulation.
“Even presenting this and dropping this to Congress is a signal to industry where we are headed,” Hollingsworth told CoinDesk. “They can begin to make decisions and move in that same direction.”
Hollingsworth wants to ensure that “good actors” in the stablecoin sphere – those that are interested in regulatory compliance – get the clarity necessary to make decisions about investments, regulation, and how to continue to develop the technology.
“Good actors in the space want to see the bad actors removed from the space, precluded from acting in the space, so that one bad actor will not besmirch the good reputation and good efforts of the entire industry,” he said.
Though Hollingsworth declined to name names on which stablecoin issuer he considered a “bad actor,” other representatives, including crypto-friendly Rep. Warren Davidson (R-Ohio), have pointed fingers at Tether.
Though most stablecoins are pegged to the U.S. dollar, Hollingsworth felt it was important to craft a bill that did not have a limited scope.
“We’re working as broadly as possible with industry and consumers globally to make sure we’re coming out with a thoughtful framework,” Hollingsworth said. “That’s one of the reasons, frankly, why the bill isn’t dollar-specific.”
“I don’t want to be behind the curve when this bill gets passed and then have to amend it to reflect the different currencies that people are issuing stablecoins in,” he added.
Even if the bill is passed, implementation of the new requirements won’t be immediate.
“Agencies have to act upon the laws Congress passes,” Hollingsworth said. “But I think the effect is immediate, because everyone knows this is going to be the law. So everyone starts to comply, even ahead of the enforcement.”
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.