Yesterday, the Chamber resolutely approved the law on engineering to regulate the stablecoins, attracting strong democratic support with a vote from 308 to 122. Since the Senate has already approved the bill, the legislation is almost final, which only needs President Trump’s signature.
In addition, two other bills have received support votes, including the Clarity Act for Crypto Market Infrastructure which has also attracted strong democratic support. He attracted 294 votes in favor of 134 opposites. A bill to prevent a CBDC was adopted with a much tighter margin from 219 to 210. However, the law on clarity and the law on the state of anti-CBDC surveillance should always be approved by the Senate.
On the one hand, the adoption of the law on engineering is something to be celebrated, offering a regulatory clarity essential to an area that develops quickly.
On the other hand, this regulatory framework has a significant cost: it considerably weakens the monitoring of the federal reserve. While the Democrats concentrated their opposition on the conflicts of interest of President Trump, they ignored the way in which this legislation undermines the traditional role of the Fed in financial stability.
Under the Biden administration, many banking regulators have gone too far in their apparent attempts to relax the cryptography sector. The reaction was to put the touch of the FDIC and the federal reserve.
Reduce the influence of the federal reserve
While the stablecoins attract a significant overhaul, they have the potential to become a significant payment instrument and a type of money. However, the law on engineering gives the federal reserve very limited involvement in their surveillance. This is largely divided between the States, the Treasury and the Occ, which in turn reports to the Treasury.
An example is what is happening in a crisis. Consider the speed at which the Silicon Valley Bank collapsed. Now think of the slightest collapse of a stablecoin collapse. However, if the FED must intervene when a stable -coin regulated by the state has a problem, the Fed must provide a notice of 48 hours. At that time, stablecoin would be over.
Instead, significant powers have been granted to the Treasury. A Stablecoin transmitter must comply with the Act on Engineering. But in demanding circumstances, the treasure can decide otherwise. In other words, he can grant exemptions from the Act on Engineering.
It can be argued that the Treasury has a conflict of interest regarding stablescoins. It is the national debt transmitter, and the stable sector could probably become its greatest investor. Consequently, its natural inclination could be too permissive with the stablecoin issuers. The more there is any request for treasury bills, the lower the interest rate is lower than short -term debt. And President Trump did not hide his desire to see lower interest rates.
In addition, the money seated in Stablecoins is not in the banking system, reducing the impact of the levers of monetary policy of the federal reserve. However, the federal reserve still retains responsibility for safeguarding financial stability, with a hand attached behind its back. If its independence is not corruptible, the alternative is to reduce its influence.
The law on genius is not content to move away from the powers of the federal reserve by supervising monetary policy and by maintaining financial stability, it triggers a subsidence in the foundations. This could have large-scale consequences for the economy of the United States and its “exorbitant privilege” to control the dominant currency of the world.
