White House Derailed Negotiation on U.S. House Stablecoin Bill: McHenry

A bipartisan agreement on stablecoin legislation was in reach, according to the chair of the House Financial Services Committee, but the ranking Democrat said McHenry halted talks.

AccessTimeIconJul 27, 2023 at 2:21 p.m. UTC
Updated Jul 28, 2023 at 10:19 p.m. UTC

House lawmakers have failed to reach a bipartisan deal on stablecoins legislation, with Financial Services Committee Chair Patrick McHenry (R-N.C.) blaming White House intransigence for the stalemate while the panel’s top Democrat said it was McHenry who shut down the talks.

The news comes a day after the finance-focused lawmakers advanced three bills on crypto issues to a vote in the full House of Representatives, the first time they advanced laws fully dedicated to the topic.

“Today I had hoped to announce an agreement with the ranking member on stablecoins legislation,” McHenry said, referring to the committee’s senior Democrat, Maxine Waters (D-Calif.). “This will not be the case… It was the White House’s unwillingness to compromise that has once again brought that negotiation to a halt.”

McHenry said he was “disappointed” but did not explain the details of the disagreement with the executive branch.

Any U.S. stablecoin bill would also have to win support in the Democrat-led Senate, so a bill coming solely from House Republicans rather than a bipartisan effort may be less likely to influence that other chamber. McHenry's choice to push the bill forward over the loud objections of committee Democrats may please fellow Republicans but could also harm its chances of becoming law.

Waters said the bill was “deeply problematic and bad for America,” and that it “promotes a race to the bottom by creating 58 different licenses,” allowing issuers to potentially include a wide range of assets in their reserve and allowing large corporations such as Meta or Walmart to issue money.

According to Waters, Democrats were concerned about the reserve provisions in the bill, as well as the parties' different views on the role federal regulators should have over stablecoin issuers.

“I urge Republicans to pull this extremist piece of legislation from the markup and your culture wars,” Waters added, citing the lack of oversight from the Federal Reserve and lack of provisions on diversity and inclusion.

The Thursday markup of the Republicans' stablecoin bill was highly contentious, with Republicans pushing forward and Democrats dragging their feet on every procedural point. The effort in the committee to openly negotiate the bill's details underlines the ongoing stalemate for U.S. stablecoin oversight.

A White House spokesperson did not immediately respond to a request for comment. Waters said neither the Fed nor the U.S. Treasury Department support the bill as it stands.

During the debate, Stephen Lynch (D-Mass.) suggested voting be postponed to September, saying Democrats hadn’t had sufficient chance to pitch their ideas.

“We have had no meaningful opportunity to amend this bill ... that's an embarrassment,” Lynch said. “We want to be heard, and we want to have input on this."

The Clarity for Payment Stablecoins Act was introduced by McHenry (R-N.C.) last week, and it seeks to offer a regulatory framework for crypto tied to the value of fiat currency. Stablecoins are a key element on the crypto markets, providing steady tokens with which investors can trade in and out of more volatile assets.

Rep. Bill Foster (D-Ill.) argued that Republicans have been defending the ability to make anonymous payments, saying that promoting self-hosted wallets would aid rogue regimes.

“I am sure that future victims of North Korean nuclear terror truly appreciate the consideration of my Republican colleagues,” Foster said, also referring to fentanyl producers accepting crypto payments.

McHenry has previously warned that rival jurisdictions are “ahead of the game” on regulating crypto, with the European Union’s markets in Crypto Assets regulation (MiCA) set to take effect in 2024.

Last week CoinDesk reported that a bipartisan grouping of Senators is pondering a rival bill that would put stringent anti-money laundering (AML) requirements on decentralized finance (DeFi) protocols, in effect treating them like banks.

UPDATE (July 27, 14:45 UTC): Adds Lynch quote.

UPDATE (July 27, 15:17 UTC): Adds Foster quote, adds paragraph on Waters' position.

UPDATE (July 27, 15:35 UTC): Adds context on importance of Dem votes for overall bill.

Edited by Nikhilesh De.


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