Congress Clashes Over Stablecoin Bill

Efforts by the House Republicans to advance a bill aimed at regulating stablecoins and their issuers are ongoing, despite substantial criticism from Democrats who claim the bill is overly accommodating to the cryptocurrency industry. Rep. Patrick McHenry (R-NC), the House Financial Services Committee’s chairman and the bill’s fervent supporter, expressed disappointment due to the lack of consensus with the Democrats on the committee.

McHenry held the White House accountable for the impasse, accusing them of resisting compromise on certain aspects of the “Clarity for Payment Stablecoins Act of 2023”. He did not elaborate on the specific contentious provisions but confirmed that negotiation efforts were continued into the previous evening.

Democrats on the committee criticized Republicans, asserting they were hastily pushing the bill. The top-ranking Democrat, Maxine Waters (D-CA), characterized the bill as “deeply problematic”, citing its failure to implement substantial oversight on stablecoin issuers. She noted that key regulatory bodies such as the Federal Reserve and Treasury Department did not back the bill. Responses from the Fed and Treasury to Decrypt’s requests for comment on Water’s statements are still pending.

While Waters agreed that many sections of the bill were bipartisan, she criticized McHenry for promoting a bill that, in her view, lacked clarity on the reserves supporting the peg of stablecoins to the U.S. dollar. Waters left the possibility of future negotiations open but expressed concern over McHenry’s impatience, which she said led to the abrupt end of discussions and advancement of a problematic bill.

Stablecoins are digital tokens that derive their value from a peg to a real-world asset or fiat currency, thereby reducing volatility. This peg is maintained by reserves that may be in cash or tangible assets.

These disputes echo previous differences between lawmakers over a related digital asset regulation bill. Democrats criticized the proposal, the Financial Innovation and Technology (FIT) for the 21st Century Act, for favoring major crypto companies and lacking consumer safeguards.

The crypto industry has broadly expressed support for both bills, with industry leaders testifying in June that the passage of these bills is crucial to keep the U.S. attractive for crypto innovation, thus preventing businesses from moving overseas.