Stablecoin bill advances with sweeping bans on non-bank issuers like Meta

Senate Republicans and Democrats have agreed on potential amendments to the Stablecoin bill. Crypto journalist Eleanor Terret announced the update on X, noting that the Senators agreed on changes to provisions on consumer protection, ethics, bankruptcy, foreign issuers, and national security.

According to Terret, a key provision in the amendment prohibits non-financial publicly traded companies from issuing stablecoins. The proposed amendment focuses on big tech companies like Meta, Apple, and Amazon. It stated that preventing them is essential to protect financial security and ensure a separation between banking and commercial.

A summary reads:

“Prohibits non-financial publicly traded companies from issuing a stablecoin unless they can meet strict criteria regarding financial risk, consumer data privacy, and fair business practices. This helps prevent companies like Meta, Amazon, Google, and Microsoft from issuing a stablecoin.”

The move is likely in reaction to recent reports that Meta is considering enabling stablecoins on its platform. Although the report stated that the Facebook parent company is in discussion with multiple issuers, it was enough to trigger concerns from Congress members, given Meta’s previous attempts to issue a stablecoin.

Senator Elizabeth Warren particularly issued a statement calling for the GENIUS Act to include a provision preventing Big tech companies and other commercial giants from owning or being affiliated with stablecoins.

She added that Senators should not support any bill allowing big tech to take over financial transactions and prevent their adversaries from accessing the payment system. However, Meta has denied any plans to develop a stablecoin, stating that Diem is dead.

Other amendments to the stablecoin bill

Beyond banning big tech from issuing stablecoins, the amendments also appear to resolve most concerns that have threatened to derail the legislation. The proposed updates also include protections such as prohibiting any misrepresentation about stablecoins.

With the amendment, issuers are prohibited from claiming that the Federal Deposit Insurance Corporation (FDIC) insurance or full faith and credit of the federal government back stablecoins. They can also not include any term that includes the United States Government or USG in the naming of their stablecoins.

The updates also address ethical concerns by prescribing stricter punishment for multiple acts of non-compliance and strengthening enforcement capabilities. For instance, the Treasury now has the power to suspend a stablecoin issuer license for reckless and wilful violations instead of just wilful violations. This is expected to prevent negligence.

Interestingly, the ethics rules have been extended to cover special government employees (SGEs), which means conflict of interest standards now apply to all government employees, including Elon Musk.

Other updates address bankruptcy protections, foreign issuers, and national security. Amendments now state that holders of stablecoins have a claim against issuers that enter bankruptcy regardless of the redemption rights they agreed to.

It also mandates regulators to analyze and present a report on gaps in bankruptcy laws as they affect stablecoin issuers and alternative frameworks that will ensure stablecoin users can get paid in full in such cases.

Meanwhile, foreign issuers now face higher standards as they must meet two criteria instead of one under the earlier version of the bill.

It said:

“Requires foreign payment stablecoin issuers to have the technological capability to comply with lawful orders and meet the standards of a comparable foreign regulatory regime.”

New provisions also give the Treasury the power to delist non-compliant stablecoins and establish stronger regulatory oversight and supervision. Issuers in sanctioned countries or countries considered to be laundering concerns cannot trade in the US.

In order to solve national security concerns, the bill states that stablecoin issuers will be held to bank-like standards for compliance with anti-money laundering and sanctions. Domestic stablecoin issuers must have the technical ability to freeze and seize stablecoins.

The amendments also clarify Treasury authority over offshore issuers of USD-backed stablecoins and directs the Financial Crimes Enforcement Network (FinCEN) to establish risk management standards for financial institutions interacting with DeFi protocols.

Stablecoin bill cloture vote scheduled for next week

With the senators now appearing to agree on the bill, the stablecoin legislation is expected to proceed as planned. Senate majority leader John Thune has already filed for cloture on the GENIUS Act, and a vote is now scheduled for Monday evening.

Cloture is a legislative procedure for expediting a bill in the Senate by limiting debate so it can move to a final vote. It takes 60 votes, three-fifths of the Senate, to invoke the cloture.

Thune had previously filed for cloture, but the vote failed because most pro-crypto senators pulled out until there were amendments to the bill. With the amendments now in place, the bill is expected to pass that stage.

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