Congress is divided on new stablecoin legislation.
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Sen. Bill Hagerty (R-Tenn.) introduced a new stablecoin bill last week that aims to bridge the gap that has hindered previous efforts to pass stablecoin legislation.
Stablecoins are cryptocurrencies that can be exchanged on a one-to-one basis with US dollars held in trust by the issuer. Its balances reach $170 billion, and monthly transaction volume exceeds $1 trillion. It is clear that it has the potential to revolutionize payments, but its legal status is unclear. As a result, Congress is working on new laws.
Earlier this year, Rep. Patrick McHenry (R-NC) introduced the “Payments Clarity Stablecoins Act” in the House of Representatives. This bill legally defines stablecoins and removes them from the SEC’s jurisdiction. It designated a regulatory authority and established a process for issuers to obtain approval. Unanswered applications were also not approved to prevent the kind of bureaucratic bottlenecks that have frustrated many in the industry.
The McHenry bill faced backlash after its release due to its federalist approach, which allowed both federal and state agencies to regulate stablecoin issuers. Maxine Waters responded by calling the bill “very problematic and bad for America.” The reason for this is that “creating 58 different types of licenses promotes a race to the bottom.” Waters worries that a slow and under-resourced state agency could oversee stablecoin issuers large enough to influence the financial system.
A new bill of the same name, introduced in the Senate by Sen. Hagerty, seeks to address this concern. beginning. This consolidates federal supervision under the Office of the Comptroller of the Currency for nonbank issuers and under the Federal Reserve System for banks. Second, federal and state regulatory powers are balanced. This allows young and small stablecoin issuers to seek state oversight. However, stablecoin issuers with more than $10 billion in assets will be required to transition to federal oversight (or certain approved state agencies). This allows for the experimentation and flexibility that is at the heart of the American system of federalism, while ensuring consistent oversight of issuers large enough to impact the broader financial system.
The crypto community has largely praised Hagerty’s bill as a step toward much-needed regulatory clarity. If this gains traction, it would satisfy the Senate’s demands for a bicameral arrangement. The House and Senate must reconcile bills with the same name in conference. If that happens, a new bill could become law. Negotiations may lead to changes, but disagreements are clear. This clarity provides a productive basis for consultations in both chambers.
“Stablecoins not only enhance trading and payment systems, they also have the potential to create new demand for U.S. Treasuries to address unsustainable budget deficits,” Sen. Hagerty wrote. Ta. For too long, these benefits and widespread promise of stablecoins have been hampered by a lack of clear regulation. My bill provides much-needed clarity and puts in place the legal framework necessary to realize the full potential of this technology for the benefit of the American people. ”
Both chambers are currently debating similar bills in the Senate, bringing the United States one step closer to comprehensive federal regulation of this rapidly growing sector.
