Stablecoin Classification and Regulation Act of 2020

I 116TH CONGRESS 2D SESSION H. R. 8827 To amend the Federal Deposit Insurance Act to provide for the classification and regulation of stablecoins, and for other purposes. IN THE HOUSE OF REPRESENTATIVES NOVEMBER 30, 2020 Ms. TLAIB (for herself, Mr. LYNCH, and Mr. GARCI´A of Illinois) introduced the following bill; which was referred to the Committee on Financial Services A BILL To amend the Federal Deposit Insurance Act to provide for the classification and regulation of stablecoins, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Stablecoin Classifica- 4 tion and Regulation Act of 2020’’. 5 SEC. 2. FINDINGS. 6 Congress finds the following: 7 (1) Article I, Section 8, Clause 5 of the United 8 States Constitution provides that Congress shall 9 have the power ‘‘to coin money, regulate the value 10 VerDate Sep 11 2014 00:33 Dec 04, 2020 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H8827.IH H8827 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 8827 IH thereof, and of foreign coin, and fix the standard of 1 weights and measures’’. 2 (2) Section 2A of the Federal Reserve Act (12 3 U.S.C. 225a) provides that the mandate of the 4 Board of Governors of the Federal Reserve System 5 is to ‘‘promote effectively the goals of maximum em- 6 ployment, stable prices, and moderate long-term in- 7 terest rates’’. 8 (3) Section 21(a) of the Banking Act of 1933 9 (12 U.S.C. 378(a)) provides in part that: 10 ‘‘(a) After the expiration of one year after [June 16, 11 1933] it shall be unlawful . . . 12 ‘‘(2) For any person, firm, corporation, associa- 13 tion, business trust, or other similar organization to 14 engage, to any extent whatever with others than his 15 or its officers, agents or employees, in the business 16 of receiving deposits subject to check or to repay- 17 ment upon presentation of a pass book, certificate of 18 deposit, or other evidence of debt, or upon request 19 of the depositor, unless such person, firm, corpora- 20 tion, association, business trust, or other similar or- 21 ganization (A) shall be incorporated under, and au- 22 thorized to engage in such business by, the laws of 23 the United States or of any State, Territory, or Dis- 24 trict, and subjected, by the laws of the United 25 VerDate Sep 11 2014 00:33 Dec 04, 2020 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H8827.IH H8827 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 8827 IH States, or of the State, Territory, or District where- 1 in located, to examination and regulation, or (B) 2 shall be permitted by the United States, any State, 3 territory, or district to engage in such business and 4 shall be subjected by the laws of the United States, 5 or such State, territory, or district to examination 6 and regulations or, (C) shall submit to periodic ex- 7 amination by the banking authority of the State 8 Territory, or District where such business is carried 9 on and shall make and publish periodic reports of its 10 condition, exhibiting in detail its resources and li- 11 abilities, such examination and reports to be made 12 and published at the same times and in the same 13 manner and under the same conditions as required 14 by the law of such State, Territory, District in the 15 case of incorporated banking institutions engaged in 16 such business in the same locality.’’. 17 (4) Section 3(l) of the Federal Deposit Insur- 18 ance Act (12 U.S.C. 1813(l)) provides that under 19 the Federal Deposit Insurance Act, the term ‘‘de- 20 posit’’ means: 21 ‘‘(1) the unpaid balance of money or its equiva- 22 lent received or held by a bank or savings associa- 23 tion in the usual course of business and for which 24 it has given or is obligated to give credit, either con- 25 VerDate Sep 11 2014 00:33 Dec 04, 2020 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H8827.IH H8827 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 8827 IH ditionally or unconditionally, to a commercial, check- 1 ing, savings, time, or thrift account, or which is evi- 2 denced by its certificate of deposit, thrift certificate, 3 investment certificate, certificate of indebtedness, or 4 other similar name, or a check or draft drawn 5 against a deposit account and certified by the bank 6 or savings association, or a letter of credit or a trav- 7 eler’s check on which the bank or savings association 8 is primarily liable: Provided, That, without limiting 9 the generality of the term money or its equivalent, 10 any such account or instrument must be regarded as 11 evidencing the receipt of the equivalent of money 12 when credited or issued in exchange for checks or 13 drafts or for a promissory note upon which the per- 14 son obtaining any such credit or instrument is pri- 15 marily or secondarily liable, or for a charge against 16 a deposit account, or in settlement of checks, drafts, 17 or other instruments forwarded to such bank or sav- 18 ings association for collection, 19 ‘‘(2) trust funds as defined in this Act received 20 or held by such bank or savings association, whether 21 held in the trust department or held or deposited in 22 any other department of such bank or savings asso- 23 ciation, 24 VerDate Sep 11 2014 00:33 Dec 04, 2020 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H8827.IH H8827 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 8827 IH ‘‘(3) money received or held by a bank or sav- 1 ings association, or the credit given for money or its 2 equivalent received or held by a bank or savings as- 3 sociation, in the usual course of business for a spe- 4 cial or specific purpose, regardless of the legal rela- 5 tionship thereby established, including without being 6 limited to, escrow funds, funds held as security for 7 an obligation due to the bank or savings association 8 or others (including funds held as dealers reserves) 9 or for securities loaned by the bank or savings asso- 10 ciation, funds deposited by a debtor to meet matur- 11 ing obligations, funds deposited as advance payment 12 on subscriptions to United States Government secu- 13 rities, funds held for distribution or purchase of se- 14 curities, funds held to meet its acceptances or letters 15 of credit, and withheld taxes: Provided, That there 16 shall not be included funds which are received by the 17 bank or savings association for immediate applica- 18 tion to the reduction of an indebtedness to the re- 19 ceiving bank or savings association, or under condi- 20 tion that the receipt thereof immediately reduces or 21 extinguishes such an indebtedness, 22 ‘‘(4) outstanding draft (including advice or au- 23 thorization to charge a bank’s or a savings associa- 24 tion’s balance in another bank or savings associa- 25 VerDate Sep 11 2014 00:33 Dec 04, 2020 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H8827.IH H8827 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 8827 IH tion), cashier’s check, money order, or other officer’s 1 check issued in the usual course of business for any 2 purpose, including without being limited to those 3 issued in payment for services, dividends, or pur- 4 chases, and 5 ‘‘(5) such other obligations of a bank or savings 6 association as the Board of Directors, after consulta- 7 tion with the Comptroller of the Currency, and the 8 Board of Governors of the Federal Reserve System, 9 shall find and prescribe by regulation to be deposit 10 liabilities by general usage, except that the following 11 shall not be a deposit for any of the purposes of this 12 Act or be included as part of the total deposits or 13 of an insured deposit: 14 ‘‘(A) any obligation of a depository institu- 15 tion which is carried on the books and records 16 of an office of such bank or savings association 17 located outside of any State, unless— 18 ‘‘(i) such obligation would be a deposit 19 if it were carried on the books and records 20 of the depository institution, and would be 21 payable at, an office located in any State; 22 and 23 ‘‘(ii) the contract evidencing the obli- 24 gation provides by express terms, and not 25 VerDate Sep 11 2014 00:33 Dec 04, 2020 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H8827.IH H8827 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 8827 IH by implication, for payment at an office of 1 the depository institution located in any 2 State; 3 ‘‘(B) any international banking facility de- 4 posit, including an international banking facility 5 time deposit, as such term is from time to time 6 defined by the Board of Governors of the Fed- 7 eral Reserve System in regulation D or any suc- 8 cessor regulation issued by the Board of Gov- 9 ernors of the Federal Reserve System; and 10 ‘‘(C) any liability of an insured depository 11 institution that arises under an annuity con- 12 tract, the income of which is tax deferred under 13 section 72 of the Internal Revenue Code of 14 1986.’’. 15 (5) Section 1(a) of the Federal Deposit Insur- 16 ance Act (12 U.S.C. 1811(a)) provides that the Fed- 17 eral Deposit Insurance Corporation was established 18 for the purpose of ‘‘insur[ing] . . . the deposits of 19 all banks . . . which are entitled to the benefits of 20 insurance’’ under the Federal Deposit Insurance 21 Act. 22 SEC. 3. REGULATION OF STABLECOINS. 23 (a) DEFINITIONS.—Section 3 of the Federal Deposit 24 Insurance Act (12 U.S.C. 1813) is amended— 25 VerDate Sep 11 2014 00:33 Dec 04, 2020 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H8827.IH H8827 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 8827 IH (1) in subsection (l)— 1 (A) in paragraph (4), by striking ‘‘and’’ at 2 the end; 3 (B) by redesignating paragraph (5) as 4 paragraph (6); and 5 (C) by inserting after paragraph (4) the 6 following: 7 ‘‘(5) stablecoins issued by such bank or savings 8 association; and’’; 9 (2) by adding at the end the following: 10 ‘‘(aa) DEFINITIONS RELATED TO STABLECOINS.— 11 ‘‘(1) STABLECOIN.—The term ‘stablecoin’ 12 means any cryptocurrency or other privately-issued 13 digital financial instrument that— 14 ‘‘(A) is directly or indirectly distributed to 15 investors, financial institutions, or the general 16 public; 17 ‘‘(B) is— 18 ‘‘(i) denominated in United States 19 dollars or pegged to the United States dol- 20 lar; or 21 ‘‘(ii) denominated in or pegged to an- 22 other national or state currency; and 23 ‘‘(C) is issued— 24 VerDate Sep 11 2014 00:33 Dec 04, 2020 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H8827.IH H8827 kjohnson on DSK79L0C42PROD with BILLS 9 •HR 8827 IH ‘‘(i) with a fixed nominal redemption 1 value; 2 ‘‘(ii) with the intent of establishing a 3 reasonable expectation or belief among the 4 general public that the instrument will re- 5 tain a nominal redemption value that is so 6 stable as to render the nominal redemption 7 value effectively fixed; or 8 ‘‘(iii) in such a manner that, regard- 9 less of intent, has the effect of creating a 10 reasonable expectation or belief among the 11 general public that the instrument will re- 12 tain a nominal redemption value that is so 13 stable as to render the nominal redemption 14 value effectively fixed. 15 ‘‘(2) NOMINAL REDEMPTION VALUE.— 16 ‘‘(A) IN GENERAL.—With respect to a 17 stablecoin, the term‘ nominal redemption value’ 18 means the value at which the stablecoin can 19 readily be converted into United States dollars, 20 or any other national or state currency, or a 21 functional monetary equivalent, on demand, at 22 the time of issuance, or otherwise accepted in 23 payment or to satisfy debts denominated in 24 VerDate Sep 11 2014 00:33 Dec 04, 2020 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H8827.IH H8827 kjohnson on DSK79L0C42PROD with BILLS 10 •HR 8827 IH United States dollars or any other national or 1 state currency. 2 ‘‘(B) TREATMENT OF INSTRUMENTS 3 PEGGED TO THE UNITED STATES DOLLAR.— 4 For purposes of subparagraph (A), the value at 5 which a stablecoin that is pegged to the United 6 States dollar or a functional monetary equiva- 7 lent can readily be converted into United States 8 dollars, on demand, at the time of issuance 9 shall be calculated using the express or implied 10 pegged rate for such conversion at the time of 11 issuance. 12 ‘‘(C) TREATMENT OF INSTRUMENTS DE- 13 NOMINATED IN OR PEGGED TO ANOTHER NA- 14 TIONAL OR STATE CURRENCY.—For purposes of 15 subparagraph (A), the value at which a 16 stablecoin that is denominated in or pegged to 17 another national or state currency or a func- 18 tional monetary equivalent can readily be con- 19 verted into United States dollars, on demand, 20 at the time of issuance shall be calculated using 21 the express or implied exchange rate for such 22 conversion at the time of issuance. 23 ‘‘(D) FUNCTIONAL MONETARY EQUIVA- 24 LENT DEFINED.—For purposes of this Act and 25 VerDate Sep 11 2014 00:33 Dec 04, 2020 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H8827.IH H8827 kjohnson on DSK79L0C42PROD with BILLS 11 •HR 8827 IH any Act enacted after the date of enactment of 1 this subsection, the term ‘functional monetary 2 equivalent’ means— 3 ‘‘(i) deposits, as defined under section 4 3 of the Federal Deposit Insurance Act; 5 ‘‘(ii) e-money and money transmitter 6 balances; 7 ‘‘(iii) other stablecoins; and 8 ‘‘(iv) any other financial instrument 9 issued for the purpose of circulating as 10 money, making payments, or satisfying 11 debts denominated in United States dollars 12 or any other national or state currency.’’. 13 (b) REGULATIONS.—The Federal Deposit Insurance 14 Act (12 U.S.C. 1811 et seq.) is amended by adding at 15 the end the following: 16 ‘‘SEC. 52. STABLECOINS. 17 ‘‘(a) ISSUING STABLECOINS.— 18 ‘‘(1) LIMITATION ON WHO MAY ISSUE 19 STABLECOINS.—It shall be unlawful for any person 20 to issue a stablecoin other than an insured deposi- 21 tory institution that is a member of the Federal Re- 22 serve System. 23 ‘‘(2) LIMITATION ON STABLECOIN-RELATED 24 COMMERCIAL ACTIVITIES.—It shall be unlawful for 25 VerDate Sep 11 2014 00:33 Dec 04, 2020 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H8827.IH H8827 kjohnson on DSK79L0C42PROD with BILLS 12 •HR 8827 IH any person to issue a stablecoin or stablecoin-related 1 product, to provide any stablecoin-related service, or 2 otherwise engage in any stablecoin-related commer- 3 cial activity, including activity involving stablecoins 4 issued by other persons, without obtaining written 5 approval in advance, and on an ongoing basis, from 6 the appropriate Federal banking agency, the Cor- 7 poration, and the Board of Governors of the Federal 8 Reserve System. 9 ‘‘(3) NOTICE AND APPROVAL REQUIREMENTS.— 10 Any person issuing a stablecoin shall— 11 ‘‘(A) notify [Text truncated for display. 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