Gottheimer Bullish on New FSC Stablecoin Bill

Above: Gottheimer and CFTC Chairman Behnam.

MAHWAH, NJ — Today, September 27, 2022, U.S. Congressman Josh Gottheimer (NJ-5) held a roundtable at Ramapo College of New Jersey with Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam and entrepreneurs and leaders from the financial and cryptocurrency industries. The group discussed how the rapid development of crypto, blockchain, and related fintech is changing the financial industry, and steps Congress is taking to bring more certainty to the digital economy. 

Gottheimer and CFTC Chairman Rostin Behnam were joined by asset management firms, banks, crypto exchanges, trade associations, and digital asset lenders including Blackrock, Grayscale, Fidelity, Anchorage Digital, BNY Mellon, Apex Crypto, Coinbase, FTX, Uniswap, Crypto Council on Innovation, and Genesis Global Lending.

“In Congress, I’ve made it my mission to ensure that the United States leads the development of emerging technologies, and that the federal government provides the certainty needed for the country to serve as a hub for financial innovation. If there is no dialogue between Congress and business, lawmakers will craft policy from an uneducated point of view. We need to make sure we keep crypto out of the hands of nefarious actors, protect consumers from snake oil salesmen, and give them the appropriate access to the right products,” said Congressman Gottheimer (NJ-5), a member of the House Financial Services Committee. “That’s why I’ve developed legislation, the Stablecoin Innovation and Protection Act, that would create guardrails for stablecoins and ensure that they are all backed one-to-one with cash or equivalents to prevent runs like we saw with the so-called ‘stablecoin’ Terra earlier this year. There are several proposals being considered by Congress that could move the ball forward for digital assets, including a new bill on stablecoins that is coming together with great promise in the House Financial Services Committee. There are still some details we have to work out, but I’m bullish on the bill.”

“The most important thing that I do is get outside of D.C. to engage with constituents, to learn from them. As the Congressman said, it allows me to do my job better,” said CFTC Chairman Rostin Behnam. “It’s important for me to work with elected officials and to understand what issues and concerns are out there. For me, a priority is all about customer protections, protecting markets, the integrity of markets, and understanding that markets need to be fair, transparent, and orderly.”

Video of the press conference following the roundtable can be found here.

Earlier this year, Gottheimer released a discussion draft of the Stablecoin Innovation and Protection Act of 2022, legislation focused on defining qualified stablecoins, carving qualified stablecoins out from more volatile cryptocurrencies, and putting appropriate protections in place for consumers and investors. 

Gottheimer’s Stablecoin Innovation and Protection Act of 2022 includes the following provisions:

• Require all qualified stablecoins to be issued by either a bank or a non-bank qualified stablecoin issuer. The non-bank issuer must maintain at least 100% reserve assets consisting of U.S. dollars, U.S. government-issued securities such as U.S. Treasuries, and other assets as deemed appropriate by the Office of the Comptroller of the Currency (OCC). The cash collateral must be held in a segregated Federal Deposit Insurance Corporation (FDIC)-insured account.  

• Define qualified stablecoins as a cryptocurrency redeemable on demand on a one-to-one basis for U.S. dollars and issued by one of the two qualified issuers. A qualified stablecoin is defined as not a security or a derivative.

• Provide the OCC with primary oversight authority over both types of stablecoin issuers and, in coordination with any other necessary agencies, be required to issue rulemakings for issues such as leverage ratios, auditing requirements, anti-money laundering/know-your-customer compliance, redemption requirements, liability management standards, and interoperability. The FDIC will be required to develop a Qualified Stablecoin Insurance Fund to manage the insurance of redemption payments of non-bank issuers.

• Does not restrict the issuance of other types of cryptocurrencies. The Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) are also not restricted from examining non-qualified stablecoins and other cryptocurrencies as potentially being securities and derivatives.

Below: Gottheimer, CFTC Chairman Behnam, and crypto and financial services leaders.

Gottheimer’s remarks as prepared for delivery following the roundtable are below: 

Good morning. Before I begin, I want to thank CFTC Chairman Behnam and the many entrepreneurs and leaders from the financial and cryptocurrency industries for joining me here today at Ramapo in Mahwah to discuss how the rapid development of crypto, blockchain, and related fintech is changing the financial industry as we speak, and steps we’re taking to bring more certainty to the digital economy.

Before Congress, I came from the private sector — working at Ford and Microsoft — and I know that maintaining a strong relationship between the private sector and lawmakers, as well as regulators, is key to American competitiveness and the success of our economy. It’s the reason I do my best to speak with startups and business leaders as often as possible and always invite their input and feedback — just like what the Chairman and I have done today. 

If there is no dialogue between Congress and business, lawmakers will craft policy from an uneducated point of view. That’s not good for our economy, the consumer looking to invest safely in crypto products, or the United States as a world power, as we seek to ensure our economy serves as the leader in the digital economy. 

In Congress, I’ve made it my mission to ensure that the United States leads the development of emerging technologies, and that the federal government provides the certainty needed for the country to serve as a hub for financial innovation. 

There is no reason we aren’t leading the world in crypto or fintech more broadly, like we did in the apps economy. Far too many startups are going to Bermuda, Bahamas, or even European countries like France. 

The President’s executive order and the recently announced framework for digital assets demonstrates that crypto is here to stay and we need to put in place good guardrails that work. When has an essentially brand-new asset class with this level of mainstream appeal to both institutional and retail investors been created in recent years? 

We need to harness this innovation while ensuring consumers know what they are buying. We need to make sure we keep crypto out of the hands of nefarious actors, protect consumers from snake oil salesmen, and give them the appropriate access to the right products.   

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.

I’ve spoken with many stakeholders in the cryptocurrency space, and they want additional clarity from Congress. 

Today, the only way they know if the government doesn’t approve of a product is if they receive notice of a fine. That’s a poor way to govern. Congress needs to come up with sensible, bipartisan guidelines, and that’s what I’m working to achieve.

The time is now to act on this issue. It’s not a time to play partisan games. If we don’t find a bipartisan solution to crypto, companies are going to flee overseas, and more ordinary investors will be hurt in the event of more issuers collapse due to lack of oversight. I’m working to help mitigate that risk while ensuring future innovation in the crypto space matures here in the United States.  

That’s why I’ve developed legislation, the Stablecoin Innovation and Protection Act, that would create guardrails for stablecoins and ensure that they are all backed one-to-one with cash or equivalents to prevent runs like we saw with the so-called “stablecoin” Terra earlier this year.

My legislation would help define “qualified stablecoins,” select the appropriate regulator, and provide guidance for those that want to issue those coins. So, only a bank or a new type of non-bank qualified stablecoin issuer can issue “qualified stablecoins.” 

Non-bank issuers would need to have 1-to-1 assets backing the coin. So, if you issued $100 dollars of Stablecoin A, you would need $100 dollars’ worth of real U.S. dollars or other very liquid assets like U.S. Treasuries sitting in reserve. 

I want people to know what they are buying, because, right now, issuers aren’t audited, and we have no idea what’s actually backing up a stablecoin.

We cannot just wait for another collapse in the stablecoin market. I’m not going to name anyone, but there are actors where we have zero insight into their actual reserves or how risky they are. 

Thankfully, I’m not the only one actively working on legislation to address emerging issues in crypto. Chairman Behnam has been incredibly involved in the development of legislation with many of us in Congress, and so have many of the finance industry leaders that joined us here today. 

The Chairman worked with Senator Debbie Stabenow on her bill, and recently made his case for empowering the CFTC with the authority to oversee a large portion of the market for digital assets in front of the Senate Committee on Agriculture. There are several proposals being considered by Congress that could move the ball forward for digital assets, including a bill on stablecoins that is coming together with great promise in the House Financial Services Committee. 

The technical details of the bill coming out of the Financial Services Committee are still being worked out, but it offers much of what I’ve fought for in my own stablecoin legislation. We’re still early in the process; I’ve been working closely with the Chair and Ranking member, but, like others, I still have additional questions about the bill. We’ll see what the final outcome is. But I think it’s critical that we work this out without delay. Time is not on our side. Regardless of where it lands, we need to pick a regulator and give the market the certainty and guardrails it needs to thrive.  

Overall, I’m looking forward to working with my colleagues on both sides of the aisle and our industry stakeholders to make sure we come to an agreement on the strongest, most effective bill possible. 

I really believe that crypto is a great opportunity for bipartisan cooperation. If you’ve watched the past several hearings in the House Financial Services Committee, you’ll see this has not been an extremely partisan issue. Members on both sides of the aisle are still learning about the technology and how it’s being used, which makes for informative and productive discussion. 

There will be disagreements and you’ll see some of my colleagues in both the House and Senate who are very critical about the industry. But I really don’t see this as an extremely partisan issue like it is sometimes portrayed to be in the media. I believe Members from both parties really want to get a strong piece of legislation done here, working together. 

I believe that we need to do more to bring people together, bring leaders together, and improve our economy.

My door is always open, and I enjoy hearing from stakeholders about what they are doing and how potential oversight will shape the future of this industry. I encourage all stakeholders to reach out to Members on both sides of the aisle as we collectively work to ensure the industry matures here in the United States, protect consumers from bad actors, and encourage innovation in this exciting industry. 

In the end, America will always be stronger when we are united and we remember how our nation was built: a land of immigrants, entrepreneurs, inventors, labor, and patriots, all committed to something larger than themselves.

I believe we live in the greatest country in the world. Because of that, I know that our best days will always be ahead of us. 

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