On July 28, 2023, the Financial Services Committee of the U.S. House of Representatives tweeted that a bill called the "Payment Stablecoin Transparency Act" had been passed, with the purpose of stricter supervision of payment stablecoins. The news has drawn close attention from the crypto industry.

Payment stable currency is a special digital currency whose value is linked to legal tender or other assets, such as USDT, USDC, DAI, etc. linked to the US dollar, or BUSD, PAX, TUSD linked to other currencies or commodities wait. The benefit of paying in a stablecoin is that it is not as volatile as Bitcoin or Ethereum, and it can be easily exchanged for other currencies or used for payments. The problem with payment stablecoins is that its issuance and operation may not be transparent and safe enough, and there may be insufficient reserves or misappropriation, bringing risks to consumers and the financial system.

The bill requires payment stablecoin issuers to obtain approval from federal banking regulators and comply with federal banking regulations, including capital, liquidity, risk management, auditing, reporting, and consumer protection requirements. The bill also requires payment stablecoin issuers to hold reserve assets equivalent to the tokens they issue and deposit them with institutions recognized by the Federal Deposit Insurance Corporation (FDIC) or the U.S. Federal Reserve Bank (FED). The bill also sets out the division of responsibilities between payment stablecoin issuers and operators, as well as penalties for violations of the law.

The content of the bill mainly includes the following aspects:

• Defined the concept and scope of payment stablecoins, including any digital tokens linked to legal tender or other assets, and any digital tokens linked to other digital tokens but convertible into legal tender or other assets.

• Provides that payment stablecoin issuers must obtain approval from federal banking regulators and comply with federal banking regulations, including capital, liquidity, risk management, auditing, reporting, and consumer protection requirements.

• It stipulates that issuers of payment stablecoins must hold reserve assets equivalent to the tokens they issue and deposit them in institutions recognized by the Federal Deposit Insurance Corporation (FDIC) or the Federal Reserve Bank of the United States (FED).

• Specifies the division of responsibilities between payment stablecoin issuers and operators, including that the issuer is responsible for token value and reserve assets, and the operator is responsible for token transactions and transfers.

• Penalties for violating legal provisions are specified, including fines, confiscation, revocation of licenses, etc.

The Payment Stablecoin Transparency Act passed by the Financial Services Committee of the U.S. House of Representatives may have the following impacts on the digitization of U.S. finance:

• Promote the development of financial digitization in the United States, improve payment efficiency and financial inclusion. The bill may increase the compliance and security of payment stablecoins, making them more in line with the needs and trust of consumers and financial institutions, thereby promoting the popularization and application of payment stablecoins, and improving the convenience and accessibility of financial services .

• Enhance the security and resilience of the U.S. financial system, and prevent systemic risks and market disorder that may be caused by payment of stable currency. This bill may reduce the potential risks and uncertainties of payment of stable currency, making it more in line with the requirements of financial supervision and stability, so as to avoid problems such as insufficient reserves, misappropriation, evasion, and abuse of payment of stable currency, which will cause shocks to the financial system and crisis.

• Enhance the competitiveness and influence of the United States in the field of global digital currency, and promote the status of the US dollar in the international financial system. The bill may improve the credibility and convertibility of payment stablecoins, making them more compliant with international financial standards and rules, thereby increasing the international acceptance and use of payment stablecoins, especially those anchored by the US dollar. Tokens, such as USDT, USDC, etc., thereby enhancing the advantages and influence of the US dollar in the global digital currency market.

The Payment Stablecoin Transparency Act may have the following impacts on the encryption industry and the digital currency market:

•  Impacts and challenges to the encryption industry and market, causing some payment stable currency issuers and operators to withdraw from the market or transfer to other jurisdictions. The bill could impose stricter regulatory requirements on payment stablecoin issuers and operators, increasing their costs and risks and making it difficult for them to continue to operate or compete in the U.S. market. Some payment stablecoin issuers and operators may choose to give up or reduce their business in the US market, or move to other regions that are more lenient or friendly to payment stablecoins, such as Europe and Asia.

• Affect the innovation vitality and diversity of the encryption industry and market, and limit the design space and application scenarios of payment stablecoins. This bill may affect the innovative vitality and diversity of payment stablecoins, because it will limit the design space and application scenarios of payment stablecoins, making it more difficult to adapt to different needs and environments. Some payment stablecoins may lose their original features or advantages, such as decentralization, flexibility, diversification, etc. Some payment stablecoins may face more competition or substitution, such as central bank digital currency (CBDC), digital currency issued by social media platforms (such as Facebook's Diem), etc.

• Change the structure and dynamics of the encryption industry and market, prompting some payment stable currency issuers and operators to cooperate or transform with traditional financial institutions. This bill may change the landscape and dynamics of the encryption industry and market, as it will prompt some payment stablecoin issuers and operators to cooperate or transform with traditional financial institutions. Some payment stablecoin issuers and operators may choose to establish partnerships or compliance frameworks with traditional financial institutions to meet legal requirements or expand business scope. Some payment stablecoin issuers and operators may choose to transform into traditional financial institutions or products, such as banks, trusts, funds, etc.

Ordinary encrypted asset investors and Web3 entrepreneurial teams may need to pay attention to the following:

•  Ordinary encrypted asset investors may need to pay more attention to the compliance and security of payment stablecoins, and avoid investing in payment stablecoins that may violate legal regulations or face the risk of punishment. Ordinary crypto asset investors may need to diversify and balance their portfolios more to cope with changes and fluctuations in the payment stablecoin market, while utilizing other types of digital currencies or financial instruments to achieve income and risk management.

• The Web3 entrepreneurial team may need to pay more attention to compliance and social responsibility, abide by laws and regulations, protect consumers and financial stability, and avoid being questioned or sanctioned by regulatory agencies or the public due to illegal acts or adverse effects. The Web3 entrepreneurial team may need to be more open and cooperative, establish good communication and collaboration with traditional financial institutions or other stakeholders, and seek opportunities for cooperation or transformation to adapt to the development trend of financial digitization.

Currently, according to the U.S. legislative process, this bill has not yet been officially passed. It still needs to be voted by the entire House of Representatives, deliberated by the Senate, and signed by the President before it can become law. Therefore, it is uncertain when this bill will actually come into effect, it may be in 2023 or later. In any case, this bill will undoubtedly have a profound impact on the encryption industry and the market, and will also trigger more discussions and controversies.

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