Progress on Stablecoin Policy Blocked by Partisan Disputes

House Republicans have recently presented a new stablecoin bill, following Democrats’ call for a fresh start. The updated draft legislation aims to create a joint federal and state regulatory framework and clarify that stablecoins do not fall under securities.

House Republicans have introduced a new stablecoin bill after Democrats called for a do-over, with the latest draft legislation aiming to establish shared federal and state oversight while clarifying that stablecoins are not securities.

The proposal offered by Republicans on the House Financial Services Committee is intended to serve as a possible starting point for talks with Democrats. However, it is uncertain whether the draft will garner bipartisan support.

This bill, which is the second legislative concept published in two weeks, proposes a definition for “payment stablecoins”, outlining the types of entities eligible to issue them, and laying out guidelines for how these companies should manage reserves. The current draft bill does not include algorithmic stablecoins, as opposed to a prior version provided before a stablecoin hearing last week.

Nonetheless, it emphasizes that issuers may be subsidiaries of federally insured depository institutions or state – or federally-regulated nonbank entities.

You can check out this article to get information about the first bill submitted.

The second bill declares that stablecoins are not securities, resolving a point of contention in the continuing debate over whether tokens should be categorized as securities or commodities.

But Democrats think differently. The draft “in no way recommends the final work on stablecoins by negotiations between the two of us,” Rep. Maxine Waters (D-Cali.) said, referring to unresolved conversations with Hill. Democrats will have to “start from scratch,” she added. 

Political Divisions Continue

In the current political atmosphere, several Democrats suggest that stronger laws regarding stablecoin issuance should be enacted.

“Typically, these programs are reserved for heavily regulated banks, and there’s a valid reason for that,” said Rep. Stephen Lynch.

“It is the danger of allowing shadow banking products, particularly stablecoins, to issue deposits like products without FDIC insurance. So I strongly believe we need to separate crypto assets from our banking system, and this [draft] bill does just the opposite.”

Rep. Stephen Lynch.

Some members of the party, such as Rep. Ritchie Torres (D-NY), claim that stablecoin issuers vary considerably from banks; there is no logic in having issuers carry banking licenses if they do not offer lending services. Legislators also disagreed on privacy issues and stablecoin know-your-customer (KYC) regulations. Rep. Bill Foster (D-Ill.) stated that authorities need access to the identities of all wallet holders in order to effectively supervise the business.

Discussions began last year on a bipartisan basis between the current Chair of the House Financial Services Committee, Patrick McHenry (R-NC), and Rep. Waters. However, the pair’s efforts were never taken beyond the committee level.

Any measure must also pass the Senate in order to be successful. If Senate Banking Committee Chair Sherrod Brown (D-Ohio) does not exhibit interest in the bill, it would most likely fail.

Despite the introduction of a new stablecoin bill by House Republicans, party squabbles continue to stymie progress toward setting clear cryptocurrency laws. For the stablecoin market to prosper and gain universal recognition, policymakers must find common ground and work together to develop a thorough and balanced regulatory framework.

Previous Article

New Crypto Regulations Coming in Bahamas

Next Article

Cryptocurrency Market Experiences Fluctuations: Approximately $200 Million Liquidated

Related Posts