The United States may soon become one of the first countries to declare stablecoins illegal. In order to process transactions with stablecoins, crypto exchanges and companies must get government approval.
Can the United States outlaw stablecoins?
The US Congress recently introduced a new bill aimed at regulating stablecoins. The bill will require companies and service providers in the cryptocurrency market to get government approval before offering stablecoins to users. If they don’t get approved and continue working with them, the bill will make stablecoins illegal.
This can definitely have a negative impact on the cryptocurrency market, which is heavily dependent on stablecoins to reduce investors ‘ exposure to volatile digital assets.
Companies must get approval from various agencies. Some of these institutions that grant permission to process and provide trading in stable coins include the Federal reserve Board of governors and others.
Over the past few months, there have been several government agencies that have pushed for regulation of stable coins. For example, Christine Lagarde, President of the European Central Bank (ECB), explained that the ECB must ensure that payments in the Euro area remain innovative.
“While stablecoins can drive additional innovation in payments and integrate well into social networks, trading and other platforms, they pose serious risks,” she said a few days ago.
As Lagarde explains, stablecoins “can threaten” financial stability and monetary sovereignty. Moreover, if the Issuer is not able to guarantee a fixed value, this will contribute to the launch. In addition, a significant transition to stablecoins from Bank deposits can affect the operations of banks and the transfer of monetary policy.
The ECB President wasn’t just talking about Tether (USDT), the world’s largest stable coin. She also had in mind about the stablecoins that can be created by other companies, including Facebook. Finally, she explained that the dominant position of these firms threatens to harm competitors and consumers. The stablecoins they create also raise concerns about data privacy and misuse of personal information.
Strong resistance from the crypto community
Although representatives believe that the implementation of the STABILITY Law will be an important milestone on the road to consumer protection, the crypto community rejects this idea. According to coinshare strategy Director Meltem Demirors, Crypta reduces the cost of servicing people who have been excluded from banking for a long time. Passing the bill into law would increase costs and compliance obligations, forcing companies to cut off groups that the Congressman is trying to protect.
Circle co-founder and CEO Jeremy Aller also took to Twitter, and expressed his opinion on the matter. He said this would represent a regressive step for digital currency innovation as it would limit the accelerating progress of both the blockchain and fintech industries.
Source: https://news.bit.team/the-united-states-may-outlaw-stablecoins/