The House Financial Services Committee (HFSC) faced significant challenges in reaching an agreement for stablecoin legislation on Thursday. A number of disagreements between Democrats and Republicans hindered progress, resulting in a deadlock. Committee Chair Patrick McHenry (R-NC) pointed the blame at the White House for stalling the bill, while Democrats accused Republicans of trying to rush incomplete legislation.
The Clarity for Payment Stablecoins Act of 2023
The bill in question, titled the Clarity for Payment Stablecoins Act of 2023, aimed to grant the Federal Reserve the authority to establish requirements for stablecoin issuers. However, it also aimed to preserve the power of state-level payment stablecoin regulators while outlining additional requirements. Despite 15 months of negotiations, McHenry asserted that the committee was on the verge of a bipartisan deal, with only a few minor provisions remaining unresolved.
Democratic Allegations and Republican Response
McHenry blamed the White House for the breakdown in negotiations, citing their refusal to compromise. However, he did not specify which specific aspects of the bill were objected to by the Biden administration. Maxine Waters (D-CA), the committee’s ranking Democrat, criticized McHenry’s impatience and referred to the bill as deeply flawed. Waters claimed that the bill lacked support from both the Treasury Department and the Federal Reserve. Federal Reserve chairman Jerome Powell had previously emphasized the central bank’s desire to have a role in the stablecoin industry to ensure credibility in monetary matters.
Waters raised concerns about the bill granting excessive authority to states, allowing them to expand the range of eligible reserve assets for backing stablecoins. She argued that this could pose risks to token holders. Additionally, Waters expressed worries that the bill would enable tech giants to issue their own stablecoins, similar to Facebook’s ill-fated Diem project. Waters questioned the rush to pass the bill at this particular time, emphasizing the need for a bipartisan approach.
While the stablecoin bill encountered difficulties, another piece of legislation called the Financial Innovation and Technology for the 21st Century Act managed to secure bipartisan approval. The bill received support from all Republicans on the committee, along with six Democrats. This legislation outlines the regulatory authority of different market regulators over cryptocurrencies, clarifying that a crypto asset may be issued in a securities transaction without being classified as a security itself.
Criticism and Recognition of Progress
Critics, such as Brad Sherman (D-CA), argued that the approved bill was too favorable toward the crypto industry. However, Congressman Ritchie Torres (D-NY) acknowledged that the legislation represented a significant step forward compared to the existing regulations. While Torres recognized that the bill was not perfect, he commended it as a genuine attempt to bring clarity to an industry that currently operates in an uncertain regulatory environment.
The failure to reach consensus on stablecoin legislation highlights the challenges faced by the House Financial Services Committee. Disagreements between Democrats and Republicans, as well as concerns regarding state authority and the potential influence of tech giants, have hindered progress. Despite these setbacks, the approval of the Financial Innovation and Technology for the 21st Century Act demonstrates that bipartisan support is possible, albeit with its share of criticism. As the debate continues, it is crucial for lawmakers to work together to find a balanced approach that ensures both innovation and necessary safeguards within the stablecoin ecosystem.