G7 Officials and US Lawmakers Move to Tighten the Screws on Stablecoins

Regulatory pressure on stablecoins escalated on two fronts in early December 2020, with G7 finance officials and US legislators both signaling intent to bring privately issued digital currencies under tighter control.

At a recent G7 meeting, German finance minister Olaf Scholz repeated his objections to letting Facebook's rebranded stablecoin project, Diem, launch in Europe. "A wolf in sheep's clothing is still a wolf," he said, adding that "it is clear to me that Germany and Europe cannot and will not accept its entry into the market while the regulatory risks are not adequately addressed." He went further, arguing that authorities "must do everything possible to make sure the currency monopoly remains in the hands of states."

In the United States, representatives Rashida Tlaib, Jesús García, and Stephen Lynch introduced the STABLE Act, a bill that would force stablecoin issuers to obtain a banking charter and clear regulatory approval before releasing any token. As drafted, it would reach issuers already active in the US market, among them Circle, Gemini, and Paxos.

An economic advisor to Tlaib told CoinDesk that the bill's test is deliberately broad: "any stablecoin that meets the statutory definition is eligible, because the focus is on what the coin promises (i.e., the obligation), not how it claims to be able to enforce the obligation (i.e., the collateral backing)."

Tlaib defended the proposal in a Twitter thread, presenting it as a safeguard for lower-income communities of color against predatory financial actors. "Especially amid the #COVID19 pandemic," she wrote, "their vulnerabilities could be exploited and obscured by bad actors looking to issue stablecoins, like other shadow money issuers in the past. The #STABLEAct combats that threat."

That framing drew skepticism from within the industry, where it was read as using pandemic hardship and social-justice language to build support for a measure whose practical effect is to raise the regulatory bar for stablecoin issuers specifically, rather than addressing predatory lending or banking practices more broadly. Commentators characterized the STABLE Act as one opening move in a longer regulatory campaign, expecting further legislative and enforcement action aimed at crypto's fiat on- and off-ramps.

Tether, the largest stablecoin issuer, was flagged as a likely eventual target of US regulators, though any resulting market disruption was expected to be short-lived given how many competing stablecoins could absorb its role.

Looking beyond the US, the piece pointed to a broader international contest — described in an IMF blog post on the shift from stablecoins toward central bank digital currencies — among governments and private issuers racing to launch the first widely adopted, fully regulated stablecoin, with US policy read as partly a hedge against forthcoming digital-currency initiatives from the EU and China.