The stablecoin of the Facebook-led Libra project, which has since been renamed Diem, is one example of the type of projects being targeted by a bill in the United States. Photo: iStock

A new US congressional bill would force stablecoin issuers to obtain bank charters and regulatory approval, sparking fears that fintech innovation could be stifled.

Representatives Rashida Tlaib, Jesús “Chuy” and Stephen Lynch, all Democrats, introduced the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act on Wednesday. Their press release said it would regulate stablecoins, identifying the stablecoin of the Facebook-led Libra project, which has since been renamed Diem, as one example of the type of projects being targeted, CoinDesk reports.

“Digital currencies, whose value is permanently pegged to or stabilized against a conventional currency like the dollar, pose new regulatory challenges while also represent a growing source of the market, liquidity, and credit risk,” the press release said.

Chastity Murphy, an economic adviser to Tlaib, told CoinDesk that both state and federal bank charters would meet the bill’s requirements.

Rohan Grey, an assistant professor at the Willamette University College of Law in Oregon and and adviser to the three representatives, told CoinDesk the bill is really defining what a deposit is as far as digital assets are concerned. In his view, stablecoins are effectively an internet-native form of a deposit.

“Any entity that wants to issue something that walks and talks like money or like a deposit should be regulated like a depository institution,” he said.

The bill is designed to protect individuals, Tlaib said.

She tweeted, “Preventing cryptocurrency providers from repeating the crimes against low- and moderate-income residents of color traditional big banks have is critically important.”

A number of stablecoin issuers currently operate in the US without banking charters, including the CENTRE consortium (comprised of Circle and Coinbase), Gemini and Paxos. Algorithmic stablecoins like or crypto collateral tokens like DAI would also appear to fall under this bill.

Threat to innovation?

Tyler Winklevoss of the Gemini exchange said the bill would stifle innovation and serve the interests of the banks, not the public.

He tweeted: “The proposed STABLE Act is a thinly veiled attempt to block @Facebook from executing on its Diem (formerly Libra) ambitions. This is obviously being pushed behind the scenes by the bankers. It is patently anti-innovation and would make stablecoins the exclusive purview of banks.

“Banks have already failed to innovate for decades and are responsible for most of our economic crises. Giving them a monopoly on innovation w/r/t stablcoins would be a disaster.

“Legislation like this proposed bill, which would extinguish free markets and competition w/r/t stablecoins, is un-American. Everyone should be against it.”