Last Friday, US lawmakers were present at Consensus 2022 and they announced to the attendees that there may be a stablecoin law implemented in the country by the end of the year. According to the panel, there needs to be a law for addressing the difficulties associated with crypto regulation as well as taxation and having a clear stablecoin law is also a must. This obviously comes in light of the TerraUSD implosion in the market, which has resulted in debate about stablecoins.
Senator Kristen Gillibrand, who recently introduced a crypto bill with Senator Cynthia Lummis, was also on the Consensus 2022 panel. Referring to the TerraUSD (UST) stablecoin, she said that the crypto market had just seen a meltdown and it is all because there is no regulation in place. She added that it was not fair for the investors in the crypto industry to not have regulation for their protection.
US Not the Only One Considering Regulation
Once the TerraUSD stablecoin exploded and resulted in massive losses in the crypto industry, it drew the attention of legislators and regulatory authorities all over the globe and not just the United States. Japan is also another country that decided to take action and they have recently launched their stablecoin law, which is part of their plan for protecting people and investors in the crypto sector in the coming five years.
Likewise, it should also be noted that the Department of Financial Services in New York also released their Virtual Currency Guidance, which is aimed at stablecoins backed by the US-dollar. This makes New York the first state to release guidance where stablecoins are concerned. Experts said that this step would also encourage other states to introduce such regulations.
What to Expect From the New Law
An executive order had been signed by President Joe Biden that was aimed at government agencies. It instructed them to take a look at the benefits and risks associated with cryptocurrency. A bipartisan infrastructure bill worth $1.2 trillion had also been signed in the previous year, which also included some crypto legislation.
The US government has been working on developing regulations for stablecoins, long before the market imploded. Lawmakers and regulatory agencies have already stated that they need to focus on those instruments that can have a big impact on financial stability. The new legislation that might be introduced for stablecoins may require issuers to maintain adequate reserves for backing their tokens and they could also be asked to declare their holdings.
In this way, it would be possible to mitigate the panic in the market, similar to what had been seen last month when the UST stablecoin went down. Nellie Liang, the Undersecretary for Domestic Finance in the US Treasury, said that since tech companies do not have a banking license, they should not be issuing crypto stablecoins. Lang said that firms issuing tokens should have to go through the same level of scrutiny that is applicable to lenders.