How does the United States supervise stable currency?Studies based on the FIT21 Act and State Legislative

Author: taxDao-AEHENA

1. Definition of stablecoin

1.1.

The International Clearance Bank believes that digital stabilization currency can be defined as an encrypted digital currency, which is the purpose of maintaining a stable value relative to specific assets or a basket of assets.Stable currency is based on token-based; its effectiveness is verified based on the tokens itself, not based on the identity of a trading opponent, that is, an account-based payment.

The price stability mechanism of digital stabilization currency is divided into two types: one is based on algorithms; the other is based on mortgage borer.The algorithm -based digital stabilization currency does not have any assets as an endorsement, but only use the algorithm to adjust the supply and demand balance according to the current price of the stable currency, thereby maintaining the exchange rate stability of the stable currency.The second is the digital stabilization currency based on the mortgage guarantee. The legal currency, gold, digital assets and other assets are used as a stable mechanism for mortgage. The stability mechanism is higher than the former.

1.2. Definition of US authorities (H.R.8827-Stablecoin Classification and Regulation Act of 2020)

(1) The term “stable currency” refers to digital financial instruments issued by any cryptocurrency or other private issues, and

(A) Direct or indirect distribution to investors, financial institutions or public;

(B) Yes

(I) Capture or linked to the US dollar; or

(Ii) Monetary pricing in other countries or states may be linked to other countries or states; and

(I) There is a fixed name redemption value;

(Ii) Interested in establishing a reasonable expectation or belief in the public, that is, the bill will retain a stable name redemption value, so that the name redemption value is effectively fixed; or

(III) Regardless of the intention, its effect is to make the public reasonably expect or believe that the bill will retain a stable redemption face value, so that the redemption surface is actually fixed.

(2) Name Retain value

(A) In general, in terms of stable currency, “nominal redemption value” means that stable coins can be converted to the value of currency or functional currency equivalent at any time or other countries or states at any time as required, or other countries, or other other countries, or other other countries, or other other countries, or other other countries, or other other countries, or other, or other, or others, or others, or othersMethods are accepted the value of paying or settlement of debt in the US dollar or other countries or states.

(B) Treatment of bills linked to the US dollar: In terms of (A), stable coins linked to the US dollar or functional currency equivalent can be exchanged for the value of the US dollar at any time as required.Explanation or implied hook exchange rate calculation.

(C) Treatment of the tools that are priced or linked to it in another country or the monetary currency of another country -for the purpose of (A) segmentation, with the other country’s currency or the state currency or the functional currency equivalent to the equivalent of the equivalent or with it with the functional currency equivalent or with it with it.The stable currency linked to the value of the US dollar can be converted to the US dollar at any time when issuance. The explicit or implied exchange rate calculation of the exchanges should be used at the time of issuance.

(D) Definition of functional currency equivalents.

(I) Artion 3 of the Federal DEPOSIT Insurance Act (I) The Deposits (DEPOSITS);

(Ii) Electronic currency and remittant balance;

(III) Other stablecoins;

(IV) Any other financial instruments issued as a debt issued by currency circulation, payment or settlement of the debt of the US dollar or any other country or the currency pricing of the state.

Definition according to the h.R.8827 method,Stable coins refer to digital financial instruments issued by cryptocurrencies or privately, which are directly or indirectly distributed to the public, and they are linked or valued with the US dollar or other countries/states.Design and effects make the public reasonably believe that its redemption value is stableEssence

2. Regulatory framework at the federal level

At present, there is no national comprehensive regulatory framework for stablecoins.Historically, the regulatory system around the stablecoin has always been uncertain and chaotic.

One of the characteristics of the United States for stable currency supervision is that it is uncertain which federal agencies have the right to supervise these products.In the past few years, this has always been a problem facing the cryptocurrency market, especially the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) whether certain technologies should be supervised as securities or commodities or two.There are differences in the problems.The US SEC Chairman Gary Gensler said that encrypted products are “under the jurisdiction of securities law and must operate within our securities system”, while CFTC announced that “Bitcoin and other virtual currencies” are commodities.The battle for this territory has extended to stable coins. Genler said that many stable currency similar to the currency market common fund, so it may belong to the jurisdiction of the American SEC.

Both the US SEC and CFTC believe that stable currency needs to be supervised to minimize the risk of the financial system.The United States CFTC has further adopted law enforcement actions against stable currency issuers’ violations of the “Commodity Trading Law” (CEA).For example, the US CFTC reached a settlement with companies that created stablecoin Tether because these companies were suspected of false statements in reserves that support stable coins.The order for Tether asked them to pay a fine of $ 41 million and stop and terminate the further violation of CEA.In addition, the United States CFTC rejected the US SEC’s attempt to claim exclusive jurisdiction and claims that BusD is a product in a separate lawsuit against Binance.

A recent proposed bill in the United States: The Financial Innovation and Technology for The 21st Century Act (“Fit 21”) provides a guidance solution for future stable currency supervision.The bill has been passed by the House of Representatives and will be voted for the Senate.

The bill is clear about the supervision of SEC and CFTC: if the stablecoin is centralized, it is under the jurisdiction of the SEC; if the stable currency is decentralized and the CFTC is under the jurisdiction of CFTC.

Central cryptocurrencies are considered “securities” because they may involve investors’ expectations and operations of centralized organizations, which is consistent with the definition of traditional securities.According to the HOWEY test, if a transaction meets the following characteristics: capital investment, investment in a common enterprise, and profit only by the efforts of the initiator or third party, then this transaction may be regarded as securities.Centralized digital assets usually involve a central organization or entity. They may have the characteristics of more similar to traditional securities, such as dependence on the reputation and expected profit of the issuer.Therefore, as the regulatory agency of the securities market, SEC is responsible for supervising these centralized digital assets.

Decentralized cryptocurrencies are considered “commodities” because they do not rely on centralized management and operations, but are based on decentralized technology, such as blockchain, which are jointly maintained by network participants.Their value depends mainly on market supply and demand, not based on the reputation or efforts of a centralized entity.Decentralized cryptocurrencies usually do not depend on a single central entity. Instead, it operates through distributed ledger technology (such as blockchain) and is jointly maintained by network participants.These assets are more similar to goods because their value depends mainly on market supply and demand relationships, not based on the reputation of a certain issue entity.Therefore, CFTC, as a regulatory agency in the commodity market, is responsible for supervising these decentralized digital assets.

The bill specifically defines the decentralization as: except for other requirements, if no one has the unilateral power to control the blockchain or it uses, and there is no issuer or the affiliated person with 20%or more digital asset control or digital digital numbersVoting rights of assets.If the bill is obtained, it will make stable currency supervision clearer.

2.1. The possible regulatory orientation of the US SEC

On April 4, 2022, Gary Gensler, President of the United States SEC, delivered a speech at the annual meeting of the University of Pennsylvania’s Capital Market Association, raising three policy issues related to stabilized currency.First of all, Genler pointed out that stabilized currency triggered the financial stability and public policy consideration involved in the US SEC’s monetary market funds and other securities regulations.These considerations include the support of stablecoins, as well as the impact of losing linked or publishers’ failure on the wider encrypted ecosystem.Secondly, Genler pointed out that stable coins have triggered issues related to it that may be used for illegal activities.Specifically, Gasler provides convenient concerns for those who try to avoid the public policy goals (such as anti -money laundering, tax compliance and sanctions) related to the traditional banking and financial systems.Third, Genler pointed out the problems related to investors’ protection, which can benefit from strengthening supervision.Gasler expressed concerns about the potential interest conflicts and market integrity issues caused by the stable currency owned by cryptocurrency transactions and loan platforms, because there is a transaction opponent relationship between customers and platforms.

2.2. CFTC’s possible regulatory orientation

The US CFTC chairman once again claimed at the Senate Hearing on March 8, 2023 that stablecoins and Ethereum were commodities and should belong to the jurisdiction of the US CFTC.

At the Senate Agricultural Hearing, CFTC Chairman Behin Behnam was asked by Senator Kirsten Gillibrand that after CFTC reached a settlement with the stable currency issuer Tether in 2021, the regulatory agency and SEC held different views.Behinan replied, “Although there is a regulatory framework around the stablecoin, in my opinion, stablecoin will still be a commodity.”He added: “Our law enforcement teams and committees are clear that stable currency Tether is a product.”CFTC in the United States has discussed that some digital assets such as Ethereum, Bitcoin and Tether are commodities, such as the lawsuit of FTX founder Sam Bankman-Fric, in mid-mid-December 2022.

2.3.

In a report in September 2022, the US Treasury Department pointed out that the impact of stablecoins and its payment systems may be “difficult to predict.”Terrausd’s liquidation attracted the attention of US Finance Minister Janet Yellen, and she soon began to talk about the possibility of stabilizing currency supervision.Yellen believes that a regulatory framework is needed to prevent stable currency risks.

StableCorp CEO Alex McDougall said: “We have allowed” experiment “like Terrausd to dominate, and its development speed is much higher than its inherent risk range. For some reasons,Senator Kirsen Gillibrand (Democratic Party-New York State) and Senator Cynthia Lummis (Republican-Wyoming State) proposed a two-party bill called the “Responsible Financial Innovation Act” (Responsible Financial Innovation “in June.Act, RFIA). Except for other matters, the bill hopes to supervise the “payment of stable currency”.Rand’s statement, this will not allow TerrausD coins.”The bill also includes terms of network security, as well as possible self -discipline organizations and some disclosure requirements.

In July 2023, the Senate re -proposed the updated version of the bill.The updated bill clearly states that the stablecoin will be managed by the state and federal bank regulatory agencies, mainly issued by deposit institutions, neither goods nor securities.However, the bill does provide a way for institutions that only seek stable currency, that is, the limited franchise of issuing stable coins from the Office of the Comptroller of the Currency (OCC).It is worth noting that the new bill stipulates that the algorithm stabilizer will be considered a mixed tool and is regulated by the US CFTC.In addition, according to the updated bill, the issuer of the algorithm stabilizer will be prohibited from calling these products “stablecoin”.

Stable currency legislation is also conducting in the House of Representatives.The Republicans of the House of Representatives led by the member Patrick McHenry proposed the “Clarity for Payment StableCoins Act”, which recently passed the bill of financial service committees in the House of Representatives.Non -bank issuers will face the requirements of similar banks, such as capital, liquidity and risk management requirements.The bill excludes digital assets created by banks, and the creation of the new algorithm stabilized coin (known as the “endogenous mortgage stable currency”) will be promulgated for a two -year suspension order.Further research.

3. State -level supervision policy and legislative dynamics

In the U.S. SEC and CFTC federal uncertainty, various regulatory frameworks for stable currency issuers have appeared in the state.At present, many states have supervised virtual currency activities through their currency transmission law, but few states provide specific guidance on stablecoins.

3.1. Dexas regulatory policy

The Dexas Act believes that stable currency supported by sovereign currency is supervised by its currency communication law. According to the law of Texas, stablecoin “can be regarded as a debt that can be converted to currency, so it belongs to the definition of currency or currency value.”

Currency

The stable currency linked to sovereignty currency can be regarded as a creditor’s right that can be converted into currency, so it belongs to the definition of currency or currency value specified in Article 151.301 (3) (3) of the “Texas Financial Law”.If the stablecoin is supported by the sovereign currency reserves and the holder of the stable currency has the right to redemption, then the holder will have a creditor’s right to support the sovereign currency that supports the stable currency, because the issuer has the obligation to (according to the holder according to the holder (according to the holderRequirements) Provide sovereign currency to exchange stable currencies.

Policy statement

According to the “Monetary Service Law”, the stable currency supported by sovereignty may be regarded as currency or currency value, so receiving stable coins in exchange for the promise of providing stable currency at the later time or different places may belong to currency transmission.The permit analysis will depend on whether the stable currency provides the right of sovereign currency redemption for the holder, thereby generating claims that can be converted to currency or currency value.Regardless of whether the right to redeem is explicitly granted or implied by the issuer, this is the case.

3.2. Nebraska Revied Statute 8-3024

The bill explains that the digital asset custody agency has the right to carry out the following or more digital asset business activities:

(1) Provide digital assets and cryptocurrency custody services.Do not provide such storage services for digital assets or cryptocurrencies, unless the digital asset or cryptocurrency is

(A) The first public transaction for the first six months before providing the custody service; or

(B) Create or issue or issued by any bank, savings bank, savings and loan associations or in accordance with the law of the state or based on US law or the construction of a construction and loan association in the state;

(2) Issuing stable coins and holding deposits in financial institutions guaranteed by Federal DEPOSIT Insurance Corporation.Financial institutions have previously set up any branches of financial institutions in the state in the state as a reserve of stable coins; and

(3) Use independent nodes to verify the network and stable coins for payment activities.

3.3. Wyoming Stable Token Act

Summary of the bill:

A single stable token is a virtual currency representative of $ 1.
A stable tokens can be exchanged for $ 1 as required (unless the short -term US treasury coupon interest rate drops below zero, or the value of assets held in the trust account drops to less than $ 1 per stable token).
The nominal value of all circulating tokens will be deposited 100%into the newly established Wylla Mingzhou Stable token trust account (although the trust will not have any trust liability between the state government and token holders).
Trust funds will invest in short -term U.S. Treasury bonds with only low -risk.
The portion of investment income exceeds 102%of the circulation token value will be deposited in the Wanderer and Mingzhou Stable token management account for payment of operating costs and other tasks of funding the state government.
The bill has established the Waiomang and Mingzhou Stable tokens to be responsible for issuing and supervising the plan.
The bill stipulates that the committee “should work hard to issue at least one kind of stable tokens of Waioming Prefecture before December 31, 2023.”Wyoming’s finance will provide a $ 500,000 start -up fund for the issuance and management of tokens, but it is expected that these funds will be repaid from the expected interest income.

3.4. New York Stablecoin Supervision (DFS Guidance)

On June 8, 2022, the New York Ministry of Finance (DFS) released the “Guidelines for the US dollar to support the Issuance of Stability” (“DFS Guidance”), which outlined the issuer of the issuer of DFS supervision to support the US dollar to support stable stabilityGeneral requirements for coins.

Regarding the redeemability, DFS Guidance requires that in addition to other matters, the stable coin issuer adopts the “clear and conspicuous redemption policy and obtains the written approval of DFS in advance”, giving the holder to timely redeem the stable currency according to the face value and redeem the stable currency in time.right.The DFS Guide defines “timely” redemption as the redemption instructions for the redemption instructions for not exceeding two working days, but if DFS “thinks that timely redemption may endure the asset support requirements of reserves or orderly liquidation of reserves assets”, this is this one.The exception may be required.

As for the reserve, the DFS Guidance requires that the stablecoin must be fully supported by the reserve assets, and the reserve assets can only include: (1) short -term national treasury coupons; (2) the reverse repurchase agreement signed with approved transactions; (3) the government monetary marketFund, but must meet the upper limit of DFS approval; and (4) deposit accounts of US or federal deposit institutions, but must meet the allowable amount restrictions held in any specific institution approved in any specific institution.DFS also hopes that the issuer will manage liquidity risks, so that the market value of reserve assets is at least equal to the value unit value that has not been settled at the end of each business day.

As for the verification, DFS Guidance requires the issuer to publish a report from the independent US licensed accountant (“CPA”) to DFS and the public every month to explain in detail: (1) the value and composition of the reserve;Stable currency units; (3) whether the reserve is sufficient to fully support the unreasonable stable currency unit; (4) whether to meet all the conditions of DFS to the reserve.DFS Guidance also requires the issuer to obtain a report each year to prove that the management of the effectiveness of internal control, structure, and procedures is obtained to meet the requirements of the monthly report and submit it to DFS within 120 days of the coverage period.The report is required to be released publicly.

4. Main legal disputes:Terraform Case-Crypto asset securities fraud

LUNA is the governance token of the Terra blockchain network. The Terra blockchain network is an entrusted equity proof of the blockchain. Its operating purpose is to issue and maintain stable currency, that is, USS, a kind of design for precise transactions for 1 US dollars, 1 US dollar, 1 US dollar agent, 1 US dollar agent, 1 US dollar agent, 1 US dollar, 1 US dollar agent, 1 US dollar, 1 US dollar, 1 US dollar, 1 US dollar, 1 US dollar agent, 1 US dollar, 1 US dollar, 1 US dollar, 1 US dollar, 1 US dollar, 1 US dollar, 1 US dollar, 1 US dollar agent 1 US dollars.currency.In order to inspire people to hold and use USST for a long time, the TerraForm Lab (founder of the Terra blockchain network) launched anchor, a savings agreement that is said to be a low -risk, high -yield savings, ensuring the annual yield of the USS deposit of 20%.

In order to maintain the account of the USS, the protocol uses a mechanism called “Seigniorage”, which can at least encourage arbitrage transactions in theory to cause upward or downward price pressure.Because UST can always be exchanged or exchanged on the protocol level, it can be exchanged for $ 1 (no matter what the market price is), arbitrage traders are motivated.UST is higher than $ 1, and they will sell USS.This process has been working until it fails.Once the UST is lifted in May 2022, it will trigger the bank crowding and convert the US to LUNA, which will be further decoupled with the linked, which will eventually lead to death spiral and drop the price of Luna to zero.

On February 16, 2023, the US SEC sued Terraform Labs and its founder Do Kwon, accusing them on sale and sales of USS and LUNA as unregistered securities.(Supplementary instructions: At this time, there is no clear regulatory policy. SEC regards both US and LUNAs as securities to supervise. If the case is later than FIT 21, LUNA is used as a algorithm stable coin and should be attributed to the jurisdiction of CFTC.) 2023On July 31st, the preliminary trial court rejected the withdrawal of TerraForm Labs and Quan Dou, and ruled that they used the anchor agreement as a revenue creation method to form a investment contract, so it belonged to securities.Although the court ruled that BUSD and other stable coins were not isolated securities, because the fixed price assets itself did not have “reasonable profit expectations”, Terra marketing and selling stock derivatives (via mirror protocols) and interest -consporting in order to encourage the US “deposit” to encourage USSThe behavior of the product (through anchor agreement) constitutes unregistered securities offering and sale.

5. Summary

This article discusses the US regulatory framework and definition of the United States in detail.According to the “Responsible Financial Innovation Act” and “Clarity for Payment Stablecoins Act”, stabilization coins have a clearer definition: any cryptocurrency and private issuance, with the US dollar or other legal currenciesDigital financial instruments with a fixed nominal redemption value.These bills require stable currency issuers to meet specific capital, liquidity, and risk management requirements, and must obtain the franchise of the US Monetary Regulatory Agency (OCC).Federal agencies such as SEC and CFTC are also actively competing for the supervision of stable currency and proposed their respective regulatory orientation. The emergence and advancement of FIT 21 make the future supervision of stable coins more clear.In addition, this article also discusses different policies and legislative dynamics of state supervision, including the specific implementation policies of Wyoming and New York State.

The continuous attention of FIT 21 and federal agencies on stablecoins is accelerating the improvement of the United States’ stabilization currency regulatory agency.In the future, the United States is expected to further strengthen the supervision measures of stable currency to ensure its stability and security in the financial system.Regulatory agencies may continue to improve the legal framework in order to cope with the continuous development of market demand and technological innovation.

Reference

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[2]. Tsinghua University’s Wu Daokou School of Finance MBA2023. (2024). Digital stabilization coin pricing analysis and future trends -take the Tenda currency USDT as an example.

[3]. Global Legal Insight. (2024). The Regulation of Stablecoins in the University.

[4]. Texas department of banking. (2019). Regular time of virtual carencies under the texas money service.

[5]. Latham & amp; watkins llp. (2023). Wyoming Stable Token Act Enacted into Law.

[6]. Office nebraska Goverment. (2022). Nebraska Revied Statute 8-3024.

[7]. CoiteleGraph. (2023). Stablecoins and ether are ‘going to be committer,’ reaffirms CFTC chair.