Crypto advocacy group claims stablecoin bill would ‘violate free speech rights’

Coin Center argued that banning algorithmic stablecoins in the United States would present constitutional challenges, as it essentially targeted code.

United States-based cryptocurrency advocacy organization Coin Center has expressed concerns about a bill recently introduced in the Senate to establish a regulatory framework and guardrails for payment stablecoins.

In an April 19 notice, Coin Center claimed that the Lummis-Gillibrand Payment Stablecoin Act — introduced by Senators Kirsten Gillibrand and Cynthia Lummis — would be “bad policy” and unconstitutional for its proposed prohibition on algorithmic stablecoins. The group argued that banning such stablecoins essentially targeted code, seemingly an unconstitutional act under the protections of the First Amendment.

“[I]t may make sense to require issuers of products like Terra to register with the SEC and make appropriate disclosures (which for all practical purposes would make their use as a stablecoin infeasible), but an outright ban on a particular business model is unnecessary and anti-innovation,” said Coin Center. “If one can comply with the securities laws, one should be able to bring a product to market.”

Coin Center Executive Director Jerry Brito said that attempting to create a regulatory framework for stablecoins in the U.S. was a “laudable effort.” According to the text of the proposed bill, only U.S.-approved issuers would be allowed to issue dollar-backed stablecoins.

Source: Jerry Brito

Lawmakers in the U.S. House of Representatives and the Senate are working toward legislative solutions to stablecoins. Coin Center suggested that the Clarity for Payment Stablecoins Act — a bill set for a full floor vote in the House — had a “not unreasonable” approach to algorithmic stablecoins by proposing a two-year moratorium rather than an outright ban.

The depegging of TerraUSD (UST) from the U.S. dollar was one of the events that contributed to a crypto market downturn in 2022. Several firms filed for bankruptcy, and U.S. authorities and regulators continued to pursue criminal and civil charges against individuals involved in illicit activities.

Senator Sherrod Brown, who chairs the Senate Banking Committee, reportedly said on April 16 that a stablecoin bill would be one of his goals in the legislative session, provided his concerns were addressed. There were no plans in the House to schedule the Clarity for Payment Stablecoins Act for a floor vote at the time of publication.