Morristown, NJ

NJ Congressman Introduces Legislation To Protect Cryptocurrency Investors

Morristown Minute

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Morristown Minute

February 15, 2022 - US Congressman Josh Gottheimer of New Jersey’s 5th District released a discussion draft of the Stablecoin Innovation and Protection Act of 2022.

On February 15, 2022, US Congressman Josh Gottheimer of New Jersey’s 5th District released a discussion draft of a bill titled, “Stablecoin Innovation and Protection Act of 2022.”

The bill aims to regulate longstanding, popular cryptocurrencies and ensure the issuers of regulated cryptocurrency “maintain at least 100% reserve assets in US dollars.”

A press release from Gottheimer’s office says the bill will “help protect against systemic risk, fraud, and illicit financing.”

The risks Gottheimer speaks of are summed up more accurately by Scott D. Hughes in his 2017 contribution to the Western State Law Review,

“[D]ecentralized cryptocurrencies do not have a specific legal entity that is responsible for consumer protection. The virtual and decentralized nature of this technology makes the application of traditional legal frameworks untenable."

The Bill:

1. Defines Stablecoins as “a cryptocurrency redeemable on-demand on a one-to-one basis for U.S. dollars and issued by one of two qualified issuers, either an insured depository institution such as a bank or a non-bank qualified Stablecoin issuer.”

  • Non-bank issuers of cryptocurrency must maintain at least 100% reserve assets in US dollars
  • Cash collateral must be held in a segregated Federal Deposit Insurance Corporation (FDIC)-insured account

2. Separates Qualified "Stablecoins" from “more volatile cryptocurrencies"

  • Provides the Office of the Comptroller of the Currency (OCC) authority over Stablecoin issuers, assigning OCC the ability to issue rules, audits, standards, and more.

3. Protects consumers and investors against loss or what Gottheimer called “systemic risk, fraud, and illicit financing.”

  • The “Federal Deposit Insurance Corporation (FDIC) will be required to develop a Qualified Stablecoin Insurance Fund” to cover the potential losses of non-bank issuers.

4. Does not “limit the authority of the Securities Exchange Commission…to regulate a cryptocurrency…that is not a qualified Stablecoin.”

“The expansion of cryptocurrency offers tremendous potential value for our economy. But for cryptocurrency to grow and thrive here in the United States, instead of overseas, we must provide more direction and certainty to the marketplace to help boost innovation and protect consumers,” “We shouldn’t stifle innovation in the cryptocurrency market. We should ensure the proper safeguards are in place and ensure our nation is a leading force in financial technology,” said Congressman Josh Gottheimer (NJ-5).
“Rep. Gottheimer's bill represents the most comprehensive and well-thought-out Stablecoin legislation we've seen to date,” said Kristin Smith, Executive Director of the Blockchain Association.
"Supporting bank and non-bank innovations in the payment system is key to long-range competitiveness and broad optionality for how dollars move in the 21st century,” said Dante Disparte, Circle’s Chief Strategy Officer and Head of Global Policy.
“[P]roper safeguards, preserves innovation, and enables a level playing field for both established Stablecoin arrangements and new entrants within this evolving marketplace,” said Teana Baker Taylor, Chief Policy Officer at the Digital Chamber of Commerce.

Find the discussion draft of the Stablecoin Innovation and Protection Act of 2022 here

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