Republicans on the U.S. House Financial Services Committee have proposed a new stablecoin regulatory draft that aims to transfer jurisdiction over stablecoins from the U.S. Securities and Exchange Commission (SEC) to federal and state bank and credit union regulators.

The new bill no longer involves algorithmic stablecoins or requires research on central bank digital currencies. It focuses on stablecoins used for payments, manages the registration process for individual potential stablecoin issuers, and is intended to be a companion document to legislation governing the U.S. digital asset market. According to the announcement, the latest version will serve as a “starting point” for Republicans to engage in dialogue with House Democrats, the Senate and the White House on stablecoin regulation in the coming months.

The draft stipulates that U.S. states can use their own standards to approve the issuance of stablecoins, but the bill sets a bottom line for state regulators to evaluate projects. If the stablecoin does not meet these benchmark standards, the Federal Reserve can also stop the project, even if the project is approved by the state. Issuing stablecoins without regulatory approval may result in criminal and civil penalties, and stablecoin issuers will be subject to anti-money laundering and KYC requirements. Stablecoin issuers awaiting full approval can obtain preliminary approval and can issue stablecoins within one year while waiting for evaluation results. Stablecoins must be backed at least one-to-one with fiat currency or short-term Treasury bonds. Certified public accountants need to audit these reserves monthly and sign them off by the issuer's CEO. Criminal liability will be pursued in the event of known false reports. If the issuer goes bankrupt, payment stablecoin holders will be compensated first. The bill also declares that stablecoins are not securities.

Since Republicans hold a majority in the U.S. House of Representatives and Democrats hold a majority in the Senate, and need Democratic Biden's signature, any bill related to digital assets will require bipartisan support to become law. (The Block)