The introduction of a new draft bill aimed at regulating stablecoins in the United States has ignited a firestorm of debate within the cryptocurrency sector. This legislative development, while still in its formative stages, is positioned to significantly alter the operational landscape for digital currencies, particularly Ethereum and its associated stablecoins.
A Big Win For Ethereum?
Ryan Berckmans, a prominent member of the Ethereum community and an investor with extensive experience, provided an enthusiastic analysis of the draft bill. He shared his thoughts via X, a popular social media platform, where he described the bill as “extremely bullish” for Ethereum.
According to Berckmans, the draft bill’s most significant feature is its broad legitimization of stablecoins on public chains, particularly Ethereum, where a significant majority of stablecoins are minted. “My initial read is that the bill is extremely bullish and legitimizes Ethereum like never before. The bill broadly legitimizes stablecoins on public chains in America, where 59% of all stablecoins are minted on Ethereum, rising to 93% when excluding centralized platforms like Tron,” he stated.
He further elaborated that the legislation “opens floodgates for US banks to obtain stablecoin licenses and for certain private companies to issue up to $10 billion in stablecoins without a license.” This provision could potentially transform the banking sector’s approach to digital currencies, integrating them more deeply into the financial mainstream and broadening their use across a range of economic activities.
Further elaborating on the positives, Berckmans was pleased with the bill’s approach to assets not pegged to the USD, such as on-chain euros and gold. The bill, according to his interpretation, does not impose regulatory measures on these assets, which could maintain a free and globalized market for them and enhance their appeal as alternative reserve currencies or investment assets.
However, Berckmans also identified several areas of concern within the draft bill. Notably, the bill imposes strict regulations on unlicensed USD-pegged stablecoins, potentially prohibiting their issuance to US persons residing in the United States. This could impact popular decentralized stablecoins like DAI. Additionally, he criticized the bill’s definition of “algorithmic payment stablecoin” for being overly broad, which could encompass a range of decentralized stablecoins that use algorithms to maintain their peg to the dollar or other assets.
New stablecoin bill draft
My initial read is that the bill is extremely bullish and legitimizes Ethereum.
Disclaimer: I'm not a lawyer or regulatory expert. I read through chunks of the new bill[1] and analyzed it with GPT4. Analyze it yourself[2]
TL;DR– Ethereum wins big…
— Ryan Berckmans ryanb.eth (@ryanberckmans) April 17, 2024
Concerns And Criticisms
Contrasting sharply with Berckmans’ optimistic perspective, Jake Chervinsky, Chief Legal Officer at Variant Fund and a former CLO of the Blockchain Association, provided a much more critical viewpoint. Chervinsky expressed his concerns via X, stating, “The bill published today is deeply flawed: it appears to ban nearly everything except a narrow band of centralized, custodial stablecoins.”
Stablecoin legislation should be a top priority for everyone who cares about crypto policy.
But the bill published today is deeply flawed: it appears to ban nearly everything except a narrow band of centralized, custodial stablecoins.
This would be far worse than status quo.
— Jake Chervinsky (@jchervinsky) April 17, 2024
Chervinsky also pointed out that the draft bill seems to contravene several principles he advocated for in his testimony to Congress last year. According to him, a focus on custodial stablecoins should be paramount, but the bill instead appears to create anti-competitive regulatory moats that could hinder further development in the space.
Despite these divergent views, Berckmans remained hopeful about the broader implications of the bill. He envisioned a scenario where the restrictions on USD-pegged stablecoins could inadvertently boost the market for non-USD stablecoins, allowing them to flourish and diversify the stablecoin market significantly. He speculated that in the future, the dominance of USD-pegged stablecoins could decrease, making way for a more balanced stablecoin ecosystem.
As the cryptocurrency community continues to analyze and debate the draft bill, it is clear that the final version of the legislation will be critical in shaping the future of stablecoins and blockchain technology in the United States and possibly globally.
At press time, ETH traded at $2,984.
