On December 2nd, Congresswoman Rashida Tlaib introduced the STABLE Act along with several of her House colleagues. Consistent with previous legislation aimed at regulating cryptocurrencies the STABLE Act raised many eyebrows within the space. Essentially, it would require all issuers of stablecoins to apply for a banking charter and comply with myriad other regulations. Given the prevalence of stablecoins this would undoubtedly hamstring innovation and possibly cut U.S. users off completely though the enforcement mechanics are unclear (more on this later). Before exploring the language of the bill and possible implications, it’s helpful to understand how stablecoins have evolved to become the focus of regulators.
Stablecoins: From Value Preservation to Value Creation
Since their inception, stablecoins have become something akin to the lifeblood of digital asset markets. Initially, the utility of stablecoins was largely confined to two use cases:
- 1. Protecting the value of a portfolio as selling into BTC or ETH would still subject returns to considerable volatility.
2. Create additional market pairs for tokens that did not have corresponding BTC or ETH pairs aiding in price discovery.
In the 2017 bull market the only stablecoin with notable volumes was Tether (USDT) which had and continues to have its own share of problems. Still, the prospect of liquid stablecoins accepted as payment or collat