Stablecoin Debate Divides Along Party Lines During House Hearing

The political parties are reportedly divided over potential congressional action on stablecoin regulations.

During a Wednesday (April 19) hearing in the House, Republicans favored reviving a bill that would regulate stablecoin issuers and give them access to Federal Reserve banking services, while Democrats expressed concern about encouraging stronger ties between crypto and the banking system, The Wall Street Journal (WSJ) reported Wednesday.

The bill had previously had bipartisan support, according to the report.

Advocates of stablecoin regulation said during the hearing that stablecoins have potential uses beyond speculation on crypto and that the developers of digital assets are moving their business to other countries that already have regulatory frameworks, the report said.

Opponents of the bill said that they want to rewrite the bill from scratch, that a new bill must reflect the collapse of FTX and other recent turmoil in the crypto sector, and that they are not sure stablecoins are even necessary, per the report.

As PYMNTS reported Monday (April 17), a draft bill published Saturday (April 15) by the House Financial Services Committee is proposing that the Federal Reserve’s board of governors be given oversight of nonbank entities and digital asset firms looking to issue stablecoins.

The discussion draft lays out a series of stricter rules around the issuance of dollar-pegged digital assets across both the federal and state level; establishes requirements for interoperability, reporting and enforcement; proposes a two-year moratorium on the creation and issuance of algorithmic stablecoins as well as those backed by other cryptocurrencies; and includes a request by the U.S. Treasury to study the feasibility and working impact of a digital dollar central bank digital currency (CBDC).

The bill also represents the first major piece of crypto legislation that lawmakers have so far shared in 2023.

During Wednesday’s hearing, New York Department of Financial Services (NYDFS) Superintendent Adrienne A. Harris said federal stablecoin legislation should build on the existing “dual banking” system.

“The dual banking system takes advantage of the comparative strengths of federal and state regulators,” Harris said, per prepared testimony provided by NYDFS. “Federal regulators are able to comprehensively address macroprudential considerations and establish foundational consumer and market protections.”

States, on the other hand, can “act more nimbly to respond to industry developments and support responsible innovation given their ability to modernize regulations more quickly and leverage their more immediate understanding of consumer needs,” Harris said.