The digital assets subcommittee of the House Financial Services Committee met once more on Thursday to discuss stablecoin regulation. This time, lawmakers had to weigh two conflicting bills.
Before the Financial Services Committee’s hearing on stablecoins, Republicans presented their version of the bill in April. Maxine Waters, a ranking member, and D-Calif., dropped her adversary’s draft earlier this week. No amendment has reached the floor.
The hearing’s opening statement from Subcommittee Chair French Hill, R-Ark., was, “We’re not starting from scratch”. She implied that Rep. Waters’ earlier remarks were a reference when she suggested that the Democrats would need to start their plan over from scratch.
Hill claimed that because of the similarities between the two proposals, our differences aren’t really that significant.
Although the two proposals are nearly identical in length and contain identical content, Waters’ draft makes sure to address the crucial issues that the opposing parties have been arguing over since the previous session.
There is currently agreement on several issues, including the composition of stablecoin reserves (both bills include cash, short-term Treasury bills, and central bank reserve deposits), the requirement that issuer applications be approved or denied within 90 days, and the recognition of stablecoins as non-securities, which frees the SEC from oversight in this area.
However, lawmakers used the meeting on Thursday to attempt and resolve some of their disagreements, particularly over the function of state regulators and who should serve as the chief regulator.
Republicans include a provision that permits stablecoin issuers to register with state-level organizations in their country. Following that, issuers would have 180 days to submit all necessary registration paperwork to federal regulators. The Federal Reserve will have 180 days to specify these standards if the bill is passed.
While the Federal Reserve still has the jurisdiction to accept or refuse federal registration, Democrats propose giving state regulators the authority to authorize issuer registration.
Rep. Stephen Lynch, a Democrat from Massachusetts, criticized the role Republicans give state regulators, saying that it promotes a “race to the bottom.” Companies that deal in cryptocurrencies have a propensity to “escape regulation,” he claimed.
Lynch acknowledged that New York’s present stablecoin policy framework is remarkable and “important,” but there is no assurance that other states would adopt it.
Hill said that the Office of the Comptroller of the Currency should take the lead in developing stablecoins because of its extensive involvement in the financial system currently.