Skeptical remarks from key Democrats Wednesday are bringing into question the chances for U.S. stablecoin legislation that the crypto industry has been relying on as the first real oversight effort from Congress.
The House Financial Services Committee held its first hearing on stablecoins in 2023 on Wednesday in connection with a discussion draft bill that was created by Reps. Maxine Waters (D-Calif.) and Patrick McHenry (R-N.C.) last year and that was published over the past weekend. And while Republicans praised the effort that went into the bill, Democrats called it outdated.
In her opening statement, Waters said the bill was a joint effort, but negotiations over its provisions remained incomplete, and “unfortunately, a lot of things happened in between” last fall and Wednesday, such as the collapse of crypto exchange FTX.
"Mr. McHenry alarmed me somewhat when he said that the members on his side of the aisle had come up with a whole new bill," Waters said. "The posted bill in no way represents ... negotiations between the two of us ... I think we're starting from scratch."
Waters added later in the hearing that the committee should move "very quickly" on an updated bill.
Rep. French Hill (R-Ark.), chairman of the subcommittee holding the hearing, took a different tone, calling the bill a bipartisan baby “named Maxine McHenry.”
“It's here today for both sides of the aisle to review and consider and to hear from our panelists. So today we're going to discuss it, think about revisions. How do we address the benefits and risks described in the Biden administration's 2021 report on stablecoins?” he said during his opening remarks.
His counterpart across the aisle, Rep. Stephen Lynch (D-Mass.), the senior Democrat on the digital-assets subcommittee, said lawmakers should question "whether stablecoins are even needed." He said the draft language released by Republicans is "outdated" and doesn't reflect any lessons learned from the implosion of major crypto firms last year.
Still, the need for a federal bill on stablecoins is apparent, said McHenry, chairman of the Financial Services Committee.
“It is important for us internationally and domestically. It's very important that we have that understanding on a bipartisan basis, the utility and importance of this legislation,” he said.
The House stablecoin effort was the most promising crypto work taking place in Congress last year, with the top members of the committee agreeing on most of the key points as the Treasury Department also weighed in. But McHenry and then-chairwoman Waters were unable to get it to the finish line in the committee. Since then, there's been no substantial talks between the parties.
Regulating stablecoins – tokens affixed to steady assets such as the U.S. dollar – has been a priority of U.S. financial agencies that see them as potential threats to future financial stability, and lawmakers from both parties argued that this narrow slice of the industry could be handled more easily than a more comprehensive bill.
One of the primary sticking points has been the question of whether any legislation can win the necessary support of Sen. Sherrod Brown (D-Ohio), chairman of the Senate Banking Committee. So far, he hasn't made any definitive comments about his position, and other Democrats in his committee have suggested that granting the industry any tailored oversight may just encourage a sector they think is too dangerous to exist at all.
A spokesperson for Brown previously told CoinDesk that stablecoins aren't used for payments now and that Brown was “continuing to look carefully at all the different approaches his colleagues have put forward."
UPDATE (April 19, 2023, 15:00 UTC): Adds additional comment.
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